What is homeowners insurance?
Homeowners insurance is a policy that protects your home against damage from things such as fire, flood, and vandalism. It’s usually required when purchasing a home with a mortgage, but it’s always a good idea to ensure that your property liabilities are protected in the event of a disaster or injury.
What homeowners insurance coversThere many homeowners insurance policies available, so be aware and informed of your choices—and don’t hesitate to ask questions if you’re confused. You'll also have to pay attention to the requirements of the lender who is helping you buy your home; most lenders insist that you have at least a minimum level of hazard coverage.
There are many types of incidents that homeowners insurance could cover. Here are just a few examples:
- Personal injury
You may have to buy a separate insurance policy for some types of hazards, such as earthquakes or floods, so carefully review the fine print in any policy you're considering. In addition to covering your house, the policy is likely to also cover some of your valuable personal items, such as furniture. It can also protect other structures on your property, including swimming pools and garages.
The price of homeowners insuranceLike any other type of insurance, homeowners insurance has a range of prices. How much you'll pay depends on many factors, such as the following:
- The value of your property.
- The extent of the coverage.
- Potential hazards of living in your area. For example, you might have to pay more if you live in a high-crime area or if natural disasters often occur where you live.
- The policy's deductible.
- Any discounts your insurance carrier might offer. You could be eligible for multiple policy discounts, military discounts, or other types of discounts.
While you can't predict how much a policy will cost until you start shopping for coverage, you might be able to get an idea about price by looking at average insurance prices in your state. In Alabama, for example, the average monthly cost is close to $100. In Florida, the average monthly cost is $165. In some states, such as Nevada, the monthly price is well under $100.
Do I need homeowners insurance?Everyone who finances the purchase of a home with a lender's help is required to purchase at least some form of coverage for the house. However, even if your home is completely paid for, there are several other reasons why you should seriously consider investing in a policy.
You should acquire homeowners insurance if other people often come ontoyour property. This includes regular guests as well as delivery people and other service providers. Homeowners insurance policies come with personal liability protection. If someone gets injured on your property and you don't have liability coverage, you could face a personal injury lawsuit that might leave you with a heavy financial burden.
Likewise, even if you don't think that your home is likely to be burglarized or suffer a natural disaster, preparing for these worst-case scenarios can give you peace of mind. After all, no neighborhood is completely free from risk.