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Homeowners insurance is a comprehensive package policy that covers both property damage and liability for injuries or damage caused by policyholders or their families to others, including damage caused by pets.

While most disasters are covered, exceptions include flooding, earthquakes, and poor maintenance. Flood coverage is provided by the federal government’s National Flood Insurance Program, while earthquake coverage can be added as an endorsement or separate policy.

A standard homeowners insurance policy includes coverage for the structure of the home, personal belongings, liability protection, and additional living expenses if the home is uninhabitable due to a covered disaster.

There are several types of homeowners insurance policies, with the most popular being the HO-3, which provides coverage for the structure, personal belongings, and personal liability. It protects against 16 disasters or perils, including fire, theft, and vandalism.

Owners of multifamily homes typically purchase an HO-3 with an endorsement to cover the risks of having renters. Renters can also get coverage with an HO-4 policy, while owners of condominiums or cooperatives can get coverage with an HO-6 policy.

Coverage options include actual cash value, replacement cost, and guaranteed/extended replacement cost. Actual cash value pays to replace the home or possessions minus depreciation, while replacement cost pays the full cost of rebuilding or replacing without deduction for depreciation. Guaranteed/extended replacement cost offers the highest level of protection, paying whatever it costs to rebuild the home as it was before, even if it exceeds the policy limit.