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Feature Articles: Insurance


Home with umbrella protecting itHomeowners and renters insurance

Brenda Procter, State Specialist and Instructor, Personal Financial Planning, University of Missouri Extension



What does homeowners insurance cover? How much do you need? Homeowners insurance, sometimes called property insurance, provides three basic types of coverage:


  1. The cost of rebuilding or repairing your home and the structures around it (e.g., detached garage, greenhouse).
  2. The cost of replacing or reimbursing the value of personal property you own.
  3. Injury to others or damage to their property caused by you, whether at home or away from home.


There are three kinds of property insurance coverage under homeowners policies (HO-1, HO-2 and HO-3). The higher the number, the more protection they provide.


  • Homeowners policies also provide coverage for personal liability and medical payments to others if you cause bodily injury or property loss to them through your own negligence, or if their injury or loss takes place on your property. Policies also may provide coverage for loss of use, which pays living expenses for similar housing while your home is being rebuilt or until you can find a suitable replacement home.
  • Special policies are provided for condominiums (HO-6 is the same as HO-2, but it has a special provision to allow for the undivided common interest in the condominium association) and market value insurance (HO-8, which provides coverage for homes with a value less than their replacement cost-coverage, is similar to HO-1).
  • There is a co-insurance feature in most property insurance policies that requires you to have 80 percent (usually) of the replacement cost of your home insured to get full payment of replacement cost. You do not get a full settlement until the home is actually replaced. Some policies offer, at a greater cost, guaranteed replacement costs. Be sure you know which type you have.



Almost every homeowner has homeowners insurance because the mortgage lender requires it. Many renters do not think about insurance on their personal property or liability insurance. Some renters have assumed that the landlord’s insurance would cover their property loss in case of a fire or other disaster, but they learned the hard way that it doesn’t. Typically, the landlord or property owner only carries insurance on the rental unit itself.


Most renters need coverage on their possessions in case they are destroyed by fire or other disasters, or liability coverage in case the renters’ actions cause bodily harm or property loss for someone else.


Renters insurance (HO-4) policies give a wide range of coverage for both personal property and liability. A renters policy insures the contents inside the building — typically providing personal property protection for the same risks and perils as an HO-2 homeowners dwelling policy — but it excludes coverage for the dwelling and also personal property coverage for damage caused by glass breakage.


Renters insurance is usually quite affordable (premiums average $8-21 per month for $20,000 to $30,000 worth of coverage), so consider it if you have no way to cover your own losses or liability.


For more information on a variety of insurance topics, visit



Israelsen, C. 2003. Personal and Family Finance class lectures at the University of Missouri, Columbia.

Israelsen, C. and Weagley, R. 2002. Personal and family finance workbook. 3rd ed. Dubuque, Iowa: Kendall/Hunt Publishing Co.

Kobliner, B. 2000. Get a financial life: Personal finance in your twenties and thirties. 2nd ed. New York: Fireside.

Weagley, R. 1993. Risky Business: Family Insurance Planning. MU Extension guide GH3420. Columbia, MO: University of Missouri.


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