When you buy a house, you will be required to obtain homeowners insurance. A good homeowner’s policy helps you protect your property, family, and belongings against various perils. It can be a crucial source of financial assistance if something harms or destroys your home.
Here’s what you need to know about homeowner’s insurance to decide whether you really need it.
What Is Homeowners Insurance?
Homeowners insurance is coverage you can purchase to protect yourself against certain types of damage and lawsuits financially.
You must pay a premium to an insurance company to obtain this coverage. In exchange, the company will compensate you if a covered event, like a fire, causes damage to your home or belongings. Homeowners insurance may also cover you financially if you injure or damage someone else’s property.
Homeowners insurance serves four primary purposes:
– Pay for home repairs, landscaping, and other structures.
– Pay to have your personal belongings repaired or replaced.
– Pay for alternative housing while your home is being repaired.
– Cover legal fees and penalties if a court finds you liable for someone else’s property damage or injury.
Is It Necessary to Have Homeowners Insurance?
Homeowners insurance isn’t required by law, but if you have a mortgage, the lender will most certainly require you to insure the home to protect the investment. Home insurance is a good investment, even if you don’t have a mortgage.
What Does Homeowners Insurance Cover?
Standard homeowners insurance typically includes six types of coverage:
– Dwelling: Covers damage to the house and any attached structures.
– Other structures: Covers independent structures on your property, such as a fence or shed.
– Personal property: Reimburses for replacing or repairing lost or damaged property.
– Loss of use: Enables you to cover temporary living costs while your house is being repaired.
– Personal liability: Pays if you negligently or unintentionally cause property damage or injury to someone.
– Medical expenses: Pays to treat someone injured on your property. It also pays if you or a family member injures someone outside your home.
Types of Homeowners Insurance Policies
There are several types of homeowners insurance, known as “policy forms.” Some types provide more comprehensive coverage, so understanding the differences is essential. Names of these policies may differ between insurance companies.
– Most popular: HO-3 insurance
HO-3 insurance policies or “special form” policies are the most common. If you have a mortgage, your lender will require at least this level of protection.
HO-3 insurance policies typically cover damage to the home caused by any peril other than those excluded by the policy. However, regarding your belongings, HO-3 insurance typically only covers damage from the perils listed in your policy.
– Widest coverage: HO-5 insurance
An HO-5 insurance policy provides the most comprehensive homeowners coverage. It covers damage to your home and belongings from any peril except those excluded by the policy. It is usually only available for well-maintained homes in low-risk areas; not all insurers provide it.
– Limited coverage: HO-1 and HO-2 insurance
HO-1 and HO-2 homeowners insurance are much less common, as they only cover damage caused by events listed in the policy.
Other policy types include:
– HO-4 insurance for renters.
– HO-6 insurance for condo owners.
– HO-7 insurance for mobile homes.
– HO-8 insurance for older homes.
