Homeowners insurance is required by every mortgage lender, but most buyers give it minimal attention. In California specifically, the insurance landscape has changed dramatically — and understanding your policy matters.
What Standard Homeowners Insurance Covers
Dwelling coverage: Damage to the structure from fire, wind, hail, lightning, vandalism, and most non-flood water damage.
Personal property: Your belongings, up to policy limits.
Liability: If someone is injured on your property and sues you.
Loss of use: Temporary living expenses if your home is uninhabitable due to a covered event.
What It Doesn’t Cover (Important)
Earthquakes: A separate earthquake policy is required. In California, this is critically important. The California Earthquake Authority (CEA) offers policies, or you can find private carriers.
Floods: A separate flood policy through the National Flood Insurance Program (NFIP) is required in designated flood zones. Lenders require it in high-risk zones.
Mold / Gradual water damage: Most standard policies exclude mold and damage that developed slowly (vs. sudden pipe burst).
Normal wear and tear: Not covered — that’s maintenance.
California’s Homeowners Insurance Crisis
Insurance carriers have been exiting California or dramatically raising rates, particularly in high-fire-risk areas. Some homeowners have been forced onto the California FAIR Plan (the insurer of last resort) — which provides basic fire coverage but lacks the full protection of a standard policy.
Before buying: Check if the property is in a high fire risk zone and what insurance options are available. Difficulty insuring a property can affect your financing options.
How Much Coverage Do You Need?
Insure for the replacement cost of rebuilding your home — not the market value. Construction costs are often much higher than market value in California.
Ask your agent for a “guaranteed replacement cost” or “extended replacement cost” rider that covers rebuilding even if costs exceed the policy limit.