Learn: Homeowner Insurance

Chances are your home is your single most valuable investment. Homeowner insurance is a “package” policy that covers property structures, personal possessions, and liability.

Because it is comprehensive, your homeowner insurance policy may include coverage you are not even aware of. If your luggage is stolen from a motel room while you are a thousand miles away from home, for example, you will of course want to notify the police, but you will also want to check with your agent about coverage for loss under your homeowner insurance policy. Also if your house burns down leaving you without a place to stay, your policy provides living expenses as well as reimbursement for damaged property.

Homeowner insurance boils down to two crucial concerns — protection and price. Although regulated at the state level, homeowner insurance is more of a national product than is auto insurance, meaning you will find fewer local variations. More than half the business is written by the ten largest carriers.

How important is homeowner insurance?

For most people, their home is their single most valuable possession and largest investment. Homeowner insurance protects your investment as well as you, your family and your household possessions.

If you were to suddenly lose your home due to a fire or a tornado, or have the contents damaged or stolen, you probably could not afford to replace everything all at once. If somebody sued you for an injury or damage caused by you or your property, the cost of defending against that lawsuit could be very expensive regardless of the outcome.

All of these situations are covered by the homeowner insurance package policy. And while it may be unpleasant to think about fire, theft, and other uncertainties of life, let’s face it, that’s reality.

Yet there’s another reason you need to carry homeowner insurance. Mortgage lenders require it. If you don’t provide proof of coverage the mortgage company will “force place” insurance, that only covers their interest not yours! In such a situation, you lose any benefits, including liability coverage. So it is always best to purchase it yourself.

Common questions

My homeowner insurance is part of the payment I make each month to the mortgage company. Can I decide what insurance to get?

You decide. It’s your home and your insurance policy. As a means of protecting its investment, the mortgage company collects a set amount from you each month, puts it in escrow, and then pays your insurance and taxes when they fall due. However, the policy is still yours and you select and/or change to the insurance you feel offers the best coverage at the best rates.

In fact, if you allow the mortgage company to choose, you might well end up paying more for your homeowner insurance.

Do I need to appraise any of my belongings?

It’s a good idea to have valuable items appraised, especially if they cannot easily be replaced, for example, antiques, jewelry, coins, and artwork. With an appraisal, your agent can more accurately evaluate whether your contents are adequately insured. Furthermore, you should maintain a list naming each item and providing a brief description of it in case of loss.

Do I have an “all risk” or “named peril” policy? What is the difference?

Be sure you know which type of policy you have and what causes of loss will be covered.

All Risk

Most, but not all, homeowner insurance policies sold are “all risk” which means they cover the largest number of causes of loss (freezing, collapse, fire, windstorm, smoke, etc.). However, there are some exclusions in all homeowner insurance policies, including but not limited to damage caused by flood, earthquake, war, neglect, and power failure. In some areas prone to a specific hazard that hazard often is excluded. An example might be coastal areas prone to hurricanes which may have exclusions regarding wind damage.

Named Peril

Some homeowner insurance policies limit the covered causes of loss to those specifically listed or “named” in the policy. These can be full of gaps so be sure what you are buying will satisfy your needs.

What other protections does my homeowner insurance policy provide?

Homeowner insurance policies regularly provide other types of coverage, including off-premises theft protection and unauthorized use of your credit cards. Make sure you understand which provisions are included in the standard coverage you elect to purchase and which require supplemental premiums.

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