Am I required to buy homeowners insurance?
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Asked August 19, 2013
If you have a mortgage, you are almost always required to have homeowners insurance as a condition of the home loan. Lenders make home insurance part of the contract in order to protect their investment. Some lenders will require you to have mortgage insurance, not true home insurance, which pays out to the lender for the amount of the loan if the home is destroyed. For the best protection, you should have both types of coverage.
Homeowners insurance protects the home against damages or total destruction. It also protects other structures on the insured property as well as your personal property up to a percentage of the total policy value. It also pays for injuries and medical costs if someone other than your immediate family is injured on the property, and for damages done to someone else's property by your property or you and your immediate family members. Without homeowners insurance, your family finances could be wiped after a single property damage or bodily injury claim.
Home insurance costs dollars a month. Compared to the cost of even a single bodily injury claim, this is negligible amount. And if you do not have insurance when injuries occur, you could be sued, and subject to lose everything, including your home. Home insurance covers the cost of legal representation, damages awarded, and punitive costs as part of the liability coverage.
Rather than question the need for homeowners insurance, it might be more practical to question whether the policy you have is sufficient for the liability concerns you face. Most policies will only pay for a small amount of personal property, and the liability limits tend to be less than the costs actually are. Be sure to calculate what your home and family's insurance needs are, and purchase enough insurance to fully protect you.
Answered August 19, 2013 by Anonymous