Home insurance is a contract between an insurance company and the owner of the home to cover certain types of damage to the property and its contents, theft of personal possessions, and liability in case of lawsuits based on incidents or events that occur on the property. This is most important form of insurance after Life insurance because people generally make their biggest investment in home. It is not just about money but also about emotional attachment to the property. Hence, it is extremely important for people to protect their home and its belongings from loss or destruction by taking up home insurance.

Home insurance provides compensation for damage or destruction of a home from disasters. In some geographical areas, the standard insurances exclude certain types of disasters, like flood and earthquakes that require additional coverage. Special insurance can be purchased for these possibilities, including flood insurance and earthquake insurance. Insurance must be updated to the present and existing value at whatever inflation up or down, and an appraisal paid by the insurance company will be added on to the policy premium. Fire insurance will require a special premium charge, plus the addition of smoke detectors and on site fire suppression systems to qualify. Maintenance-related problems are the homeowners' accountability. The policy might include inventory, or this can be bought as a separate policy, particularly for people who rent housing.

To take an insurance policy, which is based on the value of the home and what is covered in the policy, the customer has to pay a premium set by the insurance company. If he/she has a home loan, their lender will require them to have enough homeowners insurance to cover the amount they owe on the loan.

Home insurance policies differ substantially from contract to contract and from insurer to insurer as well as from region to region. Almost all policies have exclusions, which are causes of loss that are not covered. All the coverage and omissions of a particular policy are spelled out in the terms and conditions. Home insurance does not cover damages to properties due to natural wear and tear. Policies will also specify specific exclusions such as earth movement, water damage, power failure, neglect, war, nuclear hazard or intentional loss. Normal home insurance does not cover damages caused due to terrorist attacks. One needs to buy separate policies to cover these damages.