Why Do You Need Homeowners Insurance?
If you’re buying a home or have already completed the process, you may be familiar with homeowners insurance.
Your home is likely your most valuable asset. Homeowners’ insurance helps to protect you and your investment due to future uncertainty.
Unlike auto insurance, homeowners insurance is not a legal requirement. However, most mortgage lenders insist on some form of homeowners insurance.
It’s the best way for the mortgage lender to ensure you’ll have enough funds to repair and renovate your home in case of an accident or disaster.
Benefits of Homeowners Insurance
- It Protects You in the Case of Lawsuits
Home insurance protects you against potential lawsuits if someone gets injured on your property. For instance, if someone sustains a dog bite, the homeowner’s policy will protect you in case of a lawsuit.
Liability coverage will compensate the injured person’s medical costs and any damages to your property. It also covers attorney costs to defend you in court where necessary.
Most homeowners’ policies offer up to $100,000 in limited liability insurance, but you can acquire additional insurance.
- It Offers Protection from Loss
Homeowners’ insurance covers repair or replacement costs in natural disasters like hurricanes and man-made calamities like fire damage.
Dwelling protection covers the damages to the main house and other attached buildings such as garages, guest houses, and sheds. It covers electrical wiring, plumbing, heating systems, permanent air conditioning units, floor damage, and fence damage.
- It Helps to Replace Your Valuable Items
Homeowners insurance also reimburses you if your valuable possessions get damaged. The insurance refunds the value of items such as clothing, furniture, and household appliances.
It can also cover items not physically present in your house, such as a self-storage locker.
Most policies allow you to choose how you want to ensure your valuables, and you can select replacement cost or actual cash value coverage.
Here’s the difference:
Since most items depreciate with time, actual cash value allows you to recover the amount you’d receive if you sell the items. This means you’ll have to deduct depreciation.
Replacement cost coverage allows you to replace the items so you receive the amount it would cost you to buy new things.
Most insurance companies offer personal property coverage of 70% of your home insurance. For instance, suppose your property insurance is $100,000, then your property coverage will be $70,000.
- It Covers Your Guests’ Medical Bills
Sometimes visitors can get injured in your home in accidents that are not under the general liability of your policy. Although the injury will not involve a court case, the insurance will cover your guest’s medical bills.
- It Protects Your Home’s Equity
Equity refers to the value of your property after deducting the outstanding mortgage or other involved liabilities.
Homeowners insurance helps to safeguard your home’s equity. With time, the value of your property increases due to the renovations and upgrades you’ll make.
Homeowners insurance ensures that should something happen to your home; the equity will not reduce to zero.
- It Provides Protection Against Natural Disasters
Homeowners insurance helps cover repairs and renovations of the house and attached structures in case of damage from hurricanes, tornados, or storms.
However, it’s essential to note that you’ll need particular policies to cover some disasters such as earthquakes. You must also buy a separate flood insurance policy from the federal government’s National Flood Insurance Program.
- It Covers Loss of Use
Some accidents or incidents can render your home inhabitable for an extended period. For instance, a tree can fall on your roof without causing physical injuries.
If your place becomes uninhabitable, the insurance company covers your living expenses, hotel charges, and meals until your house gets repaired. It also pays the contractors who fix your home and your relocation costs.
Most insurance companies also offer about 20% coverage for loss of use of your home. For instance, if your insurance is $200,000, you’ll receive a loss of use coverage is about $40,000.
- Your Peace of Mind
The most significant benefit of acquiring homeowners insurance is your peace of mind.
The future is unpredictable, and so is nature. With homeowners insurance, you’re confident you won’t have to start from scratch or incur crippling restoration costs in any disaster.
Is Hazard Insurance and Homeowners Insurance the Same?
Some mortgage lenders use hazard insurance to describe a homeowners insurance policy section that protects your home’s structure.
In simple terms, the mortgage lender requires you to have homeowners insurance. Depending on where you are, this may include flood insurance and other types of coverage.
If you fail to purchase home insurance, the mortgage lender will issue a policy known as forced coverage. You should avoid forced coverage because such guidelines are often costly, and they exist to benefit the mortgage lender but not your best interests.
How Much Homeowners Insurance is Necessary?
The amount of homeowners insurance required will depend on your home’s value and the value of your possessions.
You can consult your real estate agent about the appropriate dollar amount that can cover the structure of your home. You can also estimate how much you’d spend rebuilding your home in your area.
The next step is to create an inventory of your valuable items. It helps determine whether their value is within your homeowner’s insurance policy’s 70% limit for personal property.
If the value exceeds the limit, it’s best to consider getting a separate Replacement Coverage. It ensures you’ll receive the necessary amount to replace your valuable items instead of the Actual Cash Value coverage.
It’s also essential to consider the additional living expenses if you realize that your home will be uninhabitable for an extended period.
Ensure you purchase enough home insurance based on your assets or between $300,000 and $500,000, the average amount for any homeowner.
You can get discounts if you purchase multiple policies or upgrade your home with smart home technology. Ensure you consult your insurance provider to discover various ways to save on your insurance.
Which Disasters Does the Home Insurance Policy Cover?
Most homeowners policies cover disasters and perils such as:
- Weight of sleet, snow, and ice
- Lighting or fire
- Windstorms and hail
- Damage by vehicles
- Damage by aircraft
- Falling objects
- Volcanic eruptions
- Freezing of household systems
- Sudden damage from a power surge
- Water discharge or overflow from household systems such as appliances, air conditioning units, and plumbing
- Sudden bulging, cracking or tearing of steam systems, fire protective systems, air conditioning, and hot water systems.
What Doesn’t Homeowners Insurance Cover?
A homeowners insurance policy doesn’t cover all possible mishaps, regardless of how much insurance you purchase.
For instance, your insurance provider can’t cover any damages you intentionally cause. Most policies don’t include damages from causes such as:
- Government action, including war
- Power failure
- Basement flood, including sewer and drain backups
- Nuclear hazards
- Earthquakes, sinkholes, and landslides
- Wear and tear due to neglect
- Infestations by mold, fungus, vermin, and birds
It’s essential to remember that home insurance policies have limits, which determine the maximum amount you’ll receive in your claim. Most policies also have deductibles, the amount you need to pay before the insurance benefits become active.
Although homeowners insurance doesn’t prevent accidents and disasters, it will provide you with financial relief in case of the same.
If you have any damages at home due to asbestos, mold, fire, or water damage, New York Total Damage Restoration has your back.
We will work with you to restore and upgrade your home through high-end renovation. Our team also has insurance experts who fight to ensure you get the total amount you deserve.
We will use the funds we help you receive to ensure we leave your home better than before the accident. Request a free consultation today, and get the peace of mind you deserve.