Noel Hendrickson / Getty Images Learn what homeowners insurance is, when it might be required, and why you might choose to have this type of insurance even if you don’t have to.
What Is Homeowners Insurance?
Homeowners insurance covers your home and belongings against damage from certain disasters, accidents, and other scenarios. If a covered event occurs, your insurance policy may pay for damages and losses, although you’re still responsible for your deductible. A standard home insurance policy usually covers your home, along with other buildings or structures on your property. Additionally, these policies cover your personal property, personal liability, and medical payments if someone gets hurt at your home.
When Is Homeowners Insurance Required?
Homeowners insurance isn’t required by law. However, if you have a mortgage on your home, your lender can legally require you to have a policy. This way, if something happens to your house, its investment is protected. Each homeowners insurance policy has a coverage limit. Your lender likely requires you to carry a minimum amount—typically 80% of your dwelling’s replacement cost—but sometimes may require as much as 100%. If you must have homeowners insurance as a condition of your mortgage but don’t, your lender can purchase a policy for you and send you the bill after giving advance notice. The policy may be more expensive than if you bought it yourself and may only cover the lender, not you. As you review your home insurance policy, you may consider reducing or removing coverage to save money on your premiums. Standard insurance policies provide six types of coverage:
Dwelling (Coverage A)Other structures (Coverage B)Personal belongings (Coverage C)Temporary living expenses during relocation (Coverage D)Liability protection (Coverage E)Medical payments (Coverage F)
Some insurance companies allow you to raise or lower limits on each of those coverage areas to customize your policy. For example, if you have fewer outbuildings (Coverage B), you may be able to reduce the amount of coverage in this area to potentially lower your premium. However, you don’t want to go below your lender’s minimum coverage requirements.
Why Would Someone Choose To Get Homeowners Insurance?
For many people, their home is their most valuable asset; home insurance helps them protect their investment. Therefore, it may make sense to have a policy even when you don’t need to if you feel like you can’t afford to replace your home and possessions if disaster strikes. Another reason to have a homeowners policy is that it likely provides liability protection if someone gets injured on your property. It can also pay for loss damages if the person who gets hurt can’t work for a while. Without insurance, you’d likely need to pay for those damages out of pocket.
Your identifying information (such as your name, Social Security number, and birthdate)The address of the homeInformation about the current condition of your homeInformation about renovations you’ve doneDetails about your home (such as the age, the style, and the type of exterior finish)A list of occupants of the homeA list of home safety devices you have
