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A standard home insurance policy covers your home’s structure, personal belongings, personal liability, and additional living expenses if a covered loss displaces you. The specific risks covered depend on your policy type and the coverages you select.

Home insurance is not required by law, but most mortgage lenders require you to carry a policy as a condition of your loan to protect their financial interest in the property. Homeowners who own their property outright are not legally obligated to carry coverage, though it is strongly recommended.

Your coverage amount is based on the estimated replacement cost of your home, what it would cost to rebuild it from the ground up at current labor and material prices, not its market value or purchase price. An insurance agent can help you calculate the right coverage amount based on your home’s size, construction type, and features.

A standard home insurance policy does not cover flood damage and must be purchased as a separate policy through the National Flood Insurance Program (NFIP) or a private insurer. If your home is in a designated flood zone, your mortgage lender may require you to carry flood insurance.

Liability-only coverage pays for damage and injuries you cause to others but does not cover your own vehicle. Full coverage adds comprehensive and collision coverage to your policy, which pays for damage to your own vehicle from accidents, theft, and other covered losses.

After an accident, you file a claim with your insurance company. They assign an adjuster to assess the damage and determine what your policy covers. Depending on who is at fault and what coverage you carry, your insurer will pay for repairs, medical bills, or other covered losses up to your policy limits, minus your deductible.

A standard auto policy typically includes several coverages:

• Property Damage Liability and Bodily Injury for harm you cause to others.
• Collision and Comprehensive Coverage protects your own vehicle.
  Uninsured/Underinsured Motorist Coverage protects you when the at-fault driver doesn’t have adequate insurance.

Insurance companies use your driving record to assess how likely you are to file a claim. Accidents and violations signal higher risk and result in higher premiums, while a clean record typically qualifies you for lower rates and may make you eligible for safe-driver discounts.