It is a multiple-line insurance, meaning that it includes both property and debt coverage, with an indivisible bonus, meaning that a single bonus is paid for all risks. Standard forms divide coverage into several categories, and the coverage provided is typically a percentage of Coverage A, which is coverage for the primary home.
The price of homeowner’s insurance often depends on what it would cost to replace the home and which additional riders—additional items to be insured—are attached to the policy. The insurance policy itself is a lengthy contract, and names what will and what will not be paid in the case of various events. Typically, claims due to floods or war (whose definition typically includes a nuclear explosion from any source), amongst other standard exclusions (like termites), are excluded.
Special insurance can be purchased for these possibilities, including flood insurance. Insurance should be adjusted to mirror replacement cost, usually upon application of an inflation factor or a cost index. The home insurance policy is usually a term contract—a contract that is in result for a fixed period of time. The payment the insured makes to the insurer is called the bonus. The insured must pay the insurer the premium each term.
Most insurers charge a lower premium if it appears less likely the home will be damaged or destroyed: for example, if the house is situated next to a fire station; if the house is equipped with fire sprinklers and fire alarms; or if the house exhibits wind mitigation measures, such as hurricane shutters. Perpetual insurance, which is a class of home insurance without a fixed term, can also be obtained in certain areas.