Along with taking safety precautions and installing home security systems, insuring your home can help to buffer against financial impact as a result of damage to your home and property. A standard homeowner’s insurance policy is intended to protect the structure of your home, as well as the belongings within it, and it may also protect you in cases of personal injury where you are considered liable.
This may also refer to other physical structures on your property (such as garages and fencing) or may only refer to high value items in the case of personal property. Policies vary according to the lender, so it’s important to check the fine print first.
Home Insurance and Home Ownership
For those who are selling, home insurance is especially important, since banks and mortgage lenders generally require that the properties they invest in are insured to protect both themselves and homeowners against financial damage.
Certain circumstances may require that you adjust your existing insurance plan: if you purchase a condo or co-op (which involves buying a stake within a larger entity), you will likely be asked to buy homeowners insurance to protect the complex as a whole.
Force Placed Insurance
Once the mortgage on your house is fully paid, homeowner’s insurance is not mandatory, but since your home is likely to be the biggest asset you have, it’s important to have the proper insurance plan in place in order to protect your finances in case of damage to it.
If you do not have a policy, there is a possibility your mortgage lender may purchase “force-placed” insurance, which tends to be more expensive and provides less coverage. In other cases, the lender may send your mortgage into default if it is considered in violation of the loan agreement, so it’s important to check this as well.
Protection In Case
The majority of insurance policies for the home tend to incorporate coverage for injuries sustained by people on your property wherever you are considered liable. This type of coverage is generally limited to a particular dollar value, which means you will need to know exactly the amount of coverage you have and what is included in the policy. In these cases, umbrella coverage can provide added liability, should you need it.
Damage to your home and belongings can also occur as the result of vandalism or weather events such as floods or earthquakes. Most basic home insurance policies will offer some form of protection in case of events such as these, but it’s always prudent to check with the lender beforehand to assess what is and isn’t covered by your policy.
Can I Own a Home Without Insuring It?
While the hope is that accidents or theft never happen, they are still a possibility. Events such as break-ins or natural disasters are already stressful enough without the added financial burden of an uninsured home to contend with.
While home insurance might not be mandatory in the strictest sense, it’s still a sensible idea to take out a policy just in case. Taking out homeowner’s insurance also provides you with peace of mind, knowing that if anything does happen, you will be financially protected.