Owning a home is expensive when compared with renting. It's nice to have a place of your own, and not have to worry about your landlord. But between utility bills, maintenance and repair costs, and homeowners association fees, it can feel like the expenses keep piling up.
Homeowner's insurance isn't just "one more bill", it's an essential protection that can save you from financial ruin. It's similar to renter's insurance in some ways, but far more comprehensive, since it covers the structure of your home, not just its contents. But given the cost, it's understandable that many people wonder whether (and why) homeowners insurance is required.
Still on the fence? Learn more about this crucial type of insurance you need to keep your home (and everything in it) safe in the event that something goes wrong.
Homeowners Insurance Is Usually Required by Mortgage Lenders
If you have a mortgage on your home, your lender will require you to have homeowners insurance in all likelihood. Unlike car insurance, you'll need to pay for a homeowner's insurance plan when you finance your home.
Your mortgage company is taking a risk when they offer you a mortgage. In order to protect their assets and yours, this crucial insurance is required by law in most cases.
A homeowner's insurance plan offers financial protection for the structure as well as most of the items inside. Whether it's a fire, wind damage, or burglary, the policy will cover you in the event of a loss. One important distinction – flood insurance is not normally included with standard homeowners insurance.
The amount of insurance you get usually depends on the total amount of your mortgage since it will need to cover the cost to replace your home. If you don't keep your home insured, your lender may buy homeowners insurance coverage on their own and simply add the cost to your monthly mortgage.
You'll Be Protected From Loss
Events like hurricanes, tornadoes, and other natural disasters can wreak havoc on your property. Without the right homeowner's insurance, your losses wouldn't be covered.
Most policies protect the home itself and any other structures like a shed, deck, or garage. This policy should cover you for things like wind damage, fires, vandalism, and most natural disasters.
Whether you lose your entire home or need to make major repairs, having homeowner's insurance can cut your out-of-pocket costs down significantly. The insurance company will send an adjuster to your home and assess the damage. Then, you can choose a contractor or you'll be written a check to make the repairs.
Check to make sure that your policy is paying out damaged on a "replacement-cost basis" rather than an "actual cash value basis." This clause will ensure that you're getting the best level of protection available to you.
If a tree falls on your house or you have a fire, the homeowner's insurance policy will pay to replace the structure or make repairs. You can't leave this to chance, as losing your home would be almost impossible to replace on your own in terms of the financial cost.
Your Stuff is Covered, Too
Most policies aren't just limited to dwelling coverage – it’s important to also consider the value of your belongings and personal property as part of the equation. Luckily, this type of insurance will also cover the replacement cost (or extended replacement cost) of your treasured stuff.
As long as your belongings are destroyed by a covered hazard, you will be reimbursed for the value. It should also include coverage if your stuff gets stolen.
Most insurance companies will pay to replace virtually anything inside your home. This includes everything from furniture and clothing to electronics, light fixtures, and even home decor.
When you sign up for a homeowner's insurance plan, take photos of your items and create a personal catalog. Include serial numbers, too since this will make it easier if your insurance company needs to pay to replace your belongings. This part of your plan is similar to renter's insurance, which is also designed to protect your stuff.
Most policies also protect your stuff no matter where you are. This includes items stolen from your car, in storage, or if you're on vacation. That's a great way to give you peace of mind whenever you are away from home.
You're Protected Against Liability
In a world rife with lawsuits, it's good to know that most homeowner's insurance includes liability. If a worker falls off a ladder in your home or someone trips on the walkway, the insurance should cover most of it.
Liability usually comes standard with most homeowner's insurance plans. This coverage protects you in the event of a lawsuit if someone were to file as a result of being injured or harmed on your property.
The liability part of your insurance does more than just protect construction workers or the postman. It also protects you if a curious child were to hurt themselves while on your property.
Another perk of liability coverage is that it includes incidents that occur away from the home itself. It also covers things like legal fees, medical costs, and lost wages if the person who is injured is out of work.
Having this simple level of protection can give you additional peace of mind. You know you're covered in the event that someone were to get hurt while on your property. Keep in mind that some policies will not cover dogs classified as a "dangerous breed" so you might not be protected in the case of a dog bite.
Say Yes to Homeowner's Insurance
Once you see the benefits, the question "do I need homeowners insurance" is answered with a resounding yes. From liability protection to replacing the home itself, every homeowner needs to have this policy in place.
While it's not an actual investment in your home in the literal sense, it has the potential to save you tens of thousands of dollars in covered repair costs that could force you to sell your home if you can't afford to pay them.
If you're not sure about what level of coverage you need, talk to an insurance agent or your lender. They can help you determine which policy will best suit your needs and answer any questions about specific coverage cases.
