Think back to your last big holiday dinner. A lot can go wrong in one little house, huh?

Maybe Uncle Lew tripped over the stairs and slid all the way down, hitting his head and crashing into the antique vase that your mom had on the kitchen table for some unknown reason. Then, when Aunt Denise came running into the hallway to help, the Tofurkey in the oven caught fire and took out half the kitchen. When the firemen arrived to put out the flames, your dog bit the neighbors who came over to help. (Never again.)

Yes, you'll be telling that story for a long time. But, uh, what happened after all the commotion was over?

Let's put it this way: we hope your parents had a good property insurance policy.

The basic gist if property insurance is like the basic gist of car insurance and health insurance: you pay some cash every month, and then if anything goes wrong, the insurance company will pay to have stuff replaced or repaired.

What's Covered?

Depending on the type of policy you have, your insurance company might pay if…

• someone hurts themselves while they're at your house.
• your house is damaged by fire.
• robbers steal or damage some of your stuff.
• the outside of your house is vandalized.
• you need to stay in a hotel because your house is out of commission for some reason.
• a natural disaster (like a hurricane) damages your house or lightning hits your home during a storm. (Beware: you'll almost always have to pay extra for flood and earthquake protection.)
  

What do all these things have in common? They're not really your fault. If you don't take care of your house and property damage happens because of that (welcome, cockroaches!), your insurance company probably won't cover the costs.

Types of Property Insurance

Renter's insurance (a.k.a. tentant's insurance). This is what you pay if—you guessed it—you rent your house. If you live in an apartment building, this insurance will protect you in case Mr. Henry down the hall blows up part of the apartment building by cooking s'mores over his gas stove again.

Homeowner's insurance. This is what you pay if you own the place you live.

Simple as that.