Why Homeowner’s Insurance is Necessary?

Unlike auto insurance and health insurance, homeowner’s insurance is not a requirement. You can own a home and not carry homeowner’s insurance, but should you? Your home is more than likely your biggest investment to date! The only way to protect your financial investment and your family is by way of homeowner’s insurance.

When you purchased your home, you may have purchased a home warranty and may feel that it is enough to protect your home. Home warranties are great and provide certain protections such as a refrigerator and air conditioning coverage in the event of a mechanical breakdown. Home warranties do not extend and provide coverage for losses and/or damage related to things like theft and/or weather events. The best choice is a homeowner’s insurance policy. Let’s dig into why.

What is homeowner’s insurance?

Homeowner’s insurance is also referred to as hazard insurance and provides protection to the property owner.  It pays for damages from unexpected losses that occur to the home and content inside the home. It also provides protection against liability claims. Essentially, a homeowner’s insurance policy combines two coverage types: property and liability.

Why do I need homeowner’s insurance?

Homeowner’s insurance isn’t a state requirement. If you no longer have a lien holder that requires you to have homeowner’s insurance, you may want to cut back on that expense/bill. You may want to alleviate a few costs associated with your home and you are looking to cancel your homeowner’s insurance. If it’s not required by law once you pay off your mortgage loan, why keep it?

Here are a few considerations:

Take a second to think about your financial situation. Are you prepared to repair the damages from a theft, fire, and/or hurricane/tornado? How about liability claims such as dog bites or falls? Though you are not required to purchase homeowner’s insurance once your mortgage loan is paid off, the last thing you want to do spend thousands of dollars to recover from these events.

Temporary housing may be needed in the event of a natural disaster. You may want to consider the price of hotels and Airbnb properties. With a homeowner’s insurance policy, things like: housing, food, laundry, internet, and storage are covered. In exchange for a premium, you can have peace of mind.

What about your personal property? Over the years, you may have spent thousands of dollars creating your perfect home. Televisions, electronics, and the most comfortable furniture all mean something to you. In the event of a natural disaster such as a tornado or flood (requires a separate policy/ additional endorsements), you are at risk of losing your personal property. A homeowner’s policy will provide coverage for the value or replacement value of your damaged property.

What’s covered/protected?

A homeowner’s insurance policy provides the following coverages:

Dwelling: Covers repairs and/or reconstruction of the home if destroyed by certain events such as a fire.

Other Structures: pays for repair and/or rebuilding of ‘other structures’ on the premise. Other structures are items not attached to the property itself.

Personal Property: provides coverage for damage to personal belongings such as clothing, electronics, and non-fixed (not attached to the property) items.

Additional Living Expenses (ALE): As stated above, additional living expenses (temporary housing) provides coverage for living expenses away from home; i.e., hotel and meal bills if the owner needs to reside elsewhere during home rebuilt or repair or after a covered loss.

Liability– protects the owner against injury and property damage suits due to incidents that occur on the owner’s property. This coverage also pays for court costs and claim settlements.

Medical Payments– provides coverage for medical costs associated with guests that may get hurt on your property.

I can’t stress it enough; things happen and many things out of our control. Your home is your biggest investment and over the years, you worked hard to pay it off and make it yours. Protection of that investment is extremely important. You have many options; together you and your agent/insurer can create the perfect policy.