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Homeowners insurance is not legally required, but it offers protection that makes it a valuable investment for your home.
What Does the Law Say?
Homeowners insurance is not required under state or federal law. However, there are a few reasons why you may need it.
While Under Mortgage
When you purchase a home with a mortgage, your lender will often require you to purchase homeowners insurance. This gives the mortgage lender assurance that they will be financially compensated if your home is destroyed or damaged. The lender has a financial interest in your home, so they need to know it is protected financially in case of damage. The homeowners policy will have a clause built in that makes sure your lender is paid if your home is damaged or destroyed by a covered event (storm damage, fire, vandalism, etc).
If you live in a floodplain, you may also be required by your mortgage lender to add flood insurance to your homeowners insurance, because floods are not covered under a standard homeowners policy.
How Much Homeowners Insurance Do You Need?
Your mortgage lender will in most cases require you to hold enough homeowners insurance to cover the rebuilding value of your home. The lender determines that value using your home’s specifics and estimation tools.
Once You Own Your Home
When you no longer owe a mortgage lender and own the home outright, you will no longer be obligated to hold homeowners insurance.
Why Get Homeowners Insurance?
Homeowners insurance covers a few different areas of protection, including dwelling coverage, personal property, personal liability, and additional living expenses.
With dwelling protection, your home is protected if it sustains any damage due to a covered event. Covered events include specific hazards, which often include fire, wind, vandalism, and natural disasters such as earthquakes. Dwelling protection will help you pay for the repairs needed for your home by reimbursing you once you file a claim.
Not only is the physical structure of your home covered, but with personal property coverage, your belongings are protected. If your possessions are damaged due to a covered event, you will be reimbursed for either the replacement value or the actual value of the item, up to a limit.
Homeowners insurance also covers your personal liability on the property. If someone on your property gets injured, they might sue you to cover their medical expenses. The same goes for someone’s property that gets damaged on your property. Your insurance helps to pay for any damages.
Your homeowners insurance also pays for additional living expenses if your home is damaged and you need to stay somewhere else while your home is being repaired back to livability.
Homeowners insurance, although not legally required, may be a great investment to protect one of your most valuable assets: your home. For more information about homeowners insurance and what it can do for you, contact Insured for Life today.
