When your home is probably your largest investment, you want to make sure it’s well-protected. Home insurance protects you against natural disasters and other threats.
Do You Have to Buy Home Insurance?
There are two common situations where you will be required to buy home insurance. The first is if you have a mortgage. The lender will mandate a minimum amount of coverage you must carry for the duration of your loan to protect the lender’s investment. The second is that some homeowner’s associations may require everyone to carry liability insurance so that neighbors are protected from any mishaps.
What Happens if You Don’t Buy Home Insurance?
The simple answer to what happens if you don’t buy home insurance is that you could lose your home. If your house burned down with all of your belongings, how would you pay to rebuild and replace everything? You’d likely be starting over from the beginning.
In case of a mortgage, the lender could declare you in default and foreclose. They may also buy an insurance policy at your expense that often won’t be the most cost-effective option and may come with administrative fees. If you break HOA rules requiring insurance, you may face fines.
What Kind of Homes Does Home Insurance Cover?
Home insurance policies generally cover the owner of a house who is living in it. If you’re a renter, you need renter’s insurance instead. Condos and manufactured homes each have their own special types of policies that work similarly even though they aren’t in the same category.
If you’re renting out your home, talk to your insurance agent about whether you’d need to get landlord insurance instead of your standard home insurance policy. If you use short-term rentals, like Airbnb, be sure to verify that your policy would cover anything that happens during the rental periods.
What if You Travel?
If you take long trips away from home for business, pleasure, or are a seasonal resident, you have additional risks that bring additional insurance needs. A vacant home is at increased risk of burglaries or of a leaking pipe going unnoticed. Many home insurance policies have a clause that your home can’t remain vacant for a certain number of days. You either need to return to check on it or hire a housesitter. If you violate this clause, your coverage could be reduced or even canceled. Special coverage for long vacancies is an available option.
What Does Home Insurance Cover?
No home insurance policies are exactly alike. You can choose the options that work for you.
Rebuilding and Repairs
Property damage protection is the most important part of your home insurance policy. It pays to repair or rebuild your home if it’s damaged by things like lightning strikes, fires, or wind. This coverage generally covers the full cost of repairs or rebuilding your home’s original condition. However, there may be limits on how much coverage you have in case of things like rapidly inflating construction costs. Be sure to understand how your protection will change over time and when you need to review your insurance needs.
Personal property includes your appliances, furniture, clothes, and just about everything else you have in your home. For this coverage, you generally want to select a limit that’s equal to the value of your property. When you file a claim, you’ll need to provide evidence, such as an inventory and proofs of purchase, to substantiate the amount of your claim.
Many personal property coverages give you the option to receive the current value of your property or new replacement value. Current value is what you might expect to pay at a secondhand store for an item of the same age and condition. New replacement value lets you go to the store and pick out new items that are identical to what you originally bought.
Jewelry and Electronics
Jewelry, electronics, collectibles, and certain other high-value items may not be fully covered under your personal property limits. Personal property coverage often has per-item limits and limits on special items that are lower than your entire personal property limit. To receive full coverage for these items, you’ll need to add additional coverage.
Personal liability doesn’t protect your home directly but is still an important coverage to have. If you injure someone and they sue you, you may have to sell your home if you don’t have enough money to pay them. That’s why most home insurance policies come with the option to add personal liability protection so that you don’t end up in that situation. Personal liability also typically covers your legal defense, so you won’t be out the cost of a lawyer even if you successfully defend against the lawsuit.
If your home needs major repairs after a covered claim and is uninhabitable, additional expenses coverage helps you with those extra costs. That could include things like a hotel or rental, storage for property you need to move out, and extra food costs if you have to eat out instead of cooking at home.
Get a Quote for Home Insurance
The cost of home insurance will vary based on what type of home you have and where you are, but it’s probably more cost-effective than you think. That’s especially true when you use an independent insurance agent to help you pick the right coverage and find the best quote. To get started, talk to Adam Johnston Insurance.