Home insurance, also usually called hazard insurance or homeowner's insurance (often abbreviated in the US real estate industry as HOI), is a form of property insurance that covers a private residence. It is an insurance policy that combines a variety of personal insurance protections, which can contain losses occurring to one's residence, its contents, loss of use (additional living expenses), or loss of additional personal possessions of the home owner, as well as liability insurance for incidents that may occur at the home or at the hands of the home owner within the policy territory.
Homeowner's policy is referred to as a multiple-line insurance policy, meaning that it involves both property insurance and liability coverage, with an undividable premium, meaning that a single premium is paid for all risks. In the US standard forms separate coverage into numerous categories, and the coverage provided is typically a percentage of Coverage A, which is coverage for the main dwelling.
The cost of homeowner's insurance often depends on what it would cost to replace the house and which supplementary endorsements or riders are attached to the policy. The insurance policy is a legal agreement between the insurance carrier (insurance company) and the named insured(s). It is a contract of protection and will put the insured back to the state he/she was in prior to the loss. Typically, claims due to floods or war (whose definition typically includes a nuclear explosion from any source) are excluded from coverage, amongst other normal exclusions (like termites). Special insurance can be purchased for these possibilities, including flood insurance. Insurance is adjusted to display replacement expense, typically upon application of an inflation factor or a cost index.
The home insurance policy is usually a term contract, i.e. a contract that is in effect for a fixed period of time. The payment the insured makes to the insurer is called the premium. The insured must pay the insurer the premium each term. Most insurers charge a lower premium if it appears less probable the home will be damaged or destroyed: for example, if the house is situated next to a fire station or is equipped with fire sprinklers and fire alarms; if the house exhibits wind mitigation measures, such as storm shutters; or if the house has a security system and has insurer-approved locks installed. Perpetual insurance, a form of home insurance without a fixed term, can also be provided in specified areas.
In the United States, most home buyers borrow money in the form of a mortgage loan, and the mortgage lender often demands that the buyer purchases homeowner's insurance as a condition of the loan, in order to safeguard the bank if the home is destroyed. Anyone with an insurable interest in the property ought to be listed on the policy. In some cases the mortgagee will waive the need for the mortgagor to carry homeowner's insurance if the worth of the land exceeds the amount of the mortgage balance. In a case like this, even the total destruction of any structures would not influence the ability of the lender to be able to foreclose and claim the full total of the loan.
Home insurance in the United States may vary from other countries; for instance, in Britain, subsidence and subsequent foundation failure is generally covered under an insurance policy. United States insurance companies used to offer foundation insurance, which was reduced to coverage for damage due to leaks, and ultimately removed altogether. The insurance is frequently misunderstood by its purchasers; for example, many believe that mold is covered when it is not a standard coverage.