Homeowners insurance typically covers damage to your home caused by fire, theft and specific natural disasters – but do you really need it? Today, we’ll cover the ins and outs of home insurance, and explain additional types of protection you may want to consider.
Assessing the Value of Home Insurance
Whether you are purchasing a new home or have just paid off your mortgage, you might be wondering if home insurance is worth the expense. According to the United States Census Bureau, the average price of a new American home is well above $300,000. For the vast majority of people, this makes s home the most valuable asset they will ever own. Homeowners insurance can help protect this investment in a number of ways. Here are some of the reasons why you should have it.
It is often required. If you have a mortgage, your lender is probably going to require that you maintain a home insurance policy. What’s more, if you fail to maintain coverage after securing a mortgage, lenders are allowed to buy insurance to protect their investment and charge you for the cost. While this may sound unfair, it’s important to remember that, until you pay off your mortgage, your lender is technically the owner of your home. If a bank thinks it’s a good idea to protect its investment with home insurance, you should probably feel the same way.
It covers more than your home. While a typical homeowners policy provides protection for your home, coverage usually extends to personal belongings and medical bills if someone is injured on your property. This can be especially beneficial, since it can save homeowners from potentially catastrophic lawsuits that might leave them bankrupt otherwise.
Depending on the policy, homeowners insurance can also provide coverage for:
- Attached structures, such as garages and decks
- Detached structures, such as fences and sheds
- Personal property, such as electronics and furniture that are either damaged or stolen
Homeowners insurance may also pay for additional living expenses after an incident, including hotel bills and temporary increased living costs. If you or a family member accidentally damages someone else’s property or causes an injury to a person on your property, homeowners insurance can help with this too.
Is it All You Need?
While it can save you from serious costs related to unexpected damage, home insurance has its limitations. Depending on your state and specific policy, your insurance plan may not cover damage due to floods, earthquakes or mold. Most home insurance policies also provide no coverage for foundation problems and other forms of structural damage. Unfortunately, traditional builders warranties also provide no coverage for structural damage. For this reason, many homeowners secure 20-year structural warranties, especially since 25 percent of all homes go on to suffer some form of structural distress – for an average cost of $42,500.