Why Do I Need Homeowners Insurance

Some consumers may wonder if they really need homeowners insurance. In most cases, the answer is simple: mortgage lenders require that homeowners maintain homeowners insurance on their mortgaged property. This protects the lender against loss in case of fire or other covered event; mortgage companies take this protection very seriously, often including the insurance premium in the monthly mortgage payment and paying the insurer directly to ensure there is no lapse in coverage. For consumers who carry a mortgage on their property, homeowners insurance is a requirement, not an option; failure to maintain the required insurance can result in the revocation of the mortgage agreement and even lead to foreclosure if not remedied promptly.

For homeowners who have paid off their mortgages, maintaining adequate homeowners insurance provides financial security in the event that the home is damaged or destroyed by fire, storm damage, or other insured incident. Homeowners insurance policies typically do not cover damage from floods or sewer backup; coverage for these hazards must be purchased separately as a rider to the basic insurance policy.

Another advantage of homeowners insurance is that the contents of the home are also covered either for their full replacement value or for the fair market value at the time of loss, allowing homeowners to recover quickly from the loss of property and maintain their previous standard of living. Outbuildings such as sheds and garages are insured for a percentage of the property’s value. Reimbursement for living expenses while the home is being repaired or rebuilt is also included in homeowners insurance policies. This eliminates the worry of having nowhere to stay after a covered incident.

One of the most important protections afforded to homeowners by their insurance policy is the liability coverage it provides. If someone is injured on your property, you could face thousands of dollars in medical bills and even lose your home in the resulting litigation. Homeowners liability insurance is provided as part of your basic policy, and protects you against such litigation and financial responsibility.