In the case of damage or a disaster that destroys a home, homeowners insurance will cover the cost to replace the building, not necessarily the real estate or “market value” of the home. Keep in mind the value of the land is not included in homeowners insurance policies.
Not all hazards are included in homeowners insurance, such as earthquakes or flooding. It’s important to talk with your insurance agent about exactly what coverage is included or excluded regarding your home coverage policy.
Extra insurance can usually be added on top of basic coverage, for perils such as flooding or earthquakes. Homeowners insurance typically includes much more than the cost to replace or fix damages of your home, though. It may also cover replacement costs for belongings that were damaged, as well as any outside structures of the house such as a garage, fencing, etc.
Homeowners insurance covers liability issues, such as any law suits towards the owner in the case of damage to other property, or people who were injured on your property. If there’s a period of time you can’t stay in the home while damages are being fixed, homeowners insurance will cover additional living costs such as hotel bills, restaurant expense, etc.