If you’re taking a mortgage on your property, your lender may insist that you sign up for a homeowner’s insurance policy to protect their collateral. However, if you own your home outright, this isn’t necessary.
But your house may be your most valuable asset, and not many can afford to pay for damages and repairs when disaster strikes. Even if you live in a safe environment and your house is new, you can never be too prepared for incidents that a basic homeowner’s policy can cover.
Before you skip it to save a couple of hundred dollars, continue reading this article. We’ll take a look at the 3 main reasons why you need a homeowner’s policy!
Policy Coverage is Wider Than You Think
You’ll need to keep in mind that homeowner’s policy doesn’t cover everything. An example would be your home’s foundation which requires a supplementary policy and you can find foundation insurance explained in Policy Scout’s article.
However, in most situations, the common type of homeowners policy (HO3) is enough for most people especially if their homes aren’t too old and/or located in flood and earthquake zones.
HO3 covers the dwelling, other structures on the property, and personal property damage from quite an extensive list of causes, so much so that they are referred to as the ‘16 named perils’ within the industry.
Some of these perils include:
- Lightning or fire
- Hails or windstorm
- Short circuits
- Falling objects
You Get Coverage if You Are Sued
Homeowners insurance doesn’t only cover property damage. Depending on the scope of your policy, you are entitled to liability coverage as well. The insurance company will pay if you are responsible for causing injury to someone and are sued for it. This also applies to damages caused by pets.
For example, if you have a friend coming over and they trip over a cable due to your own negligence, they can sue you and request that you pay their medical bills if they are hospitalized.
Your friendship may turn sour but you’ll be relieved to know that the insurance company will pay for the costs of defending yourself in court as well as whatever the court tells you to pay (the limit will depend on your policy). Most liability coverages will also pay for your friend’s medical bills.
Helps Pay for Living Expenses
In any event that a disaster wrecks your house, you’ll need to do some repair work. This will take a while, and you’ll need to move your family to some sort of temporary housing or accommodation. All of this will add to your costs.
But thankfully, the same insurance that pays for your repair costs would usually provide you with additional living expense coverage. This coverage can be generous and would include rent, hotel stays, and even meals.
However, the terms for this coverage may be blurry, so discuss with your insurance agents on the conditions required to make you eligible for this. For example, your living expenses may not be covered if the damage is due to flooding.