Do you need home insurance?
Do you need home insurance?
Many new homebuyers are unaware of the extra expenses that will be added onto a monthly payment. It’s easy to think that your monthly payment will simply be your mortgage, but this is typically not the case.
If you are a renter, there’s a good chance that you chose to get renter’s insurance to protect yourself from losing all of your belongings in a natural disaster or a robbery. But, that renter’s insurance is not required in order for you to live in that home.
So, is home insurance required when you are purchasing a home? By law, home insurance is not required, but banks require it as a condition for your mortgage.
You’ll need insurance until the entire loan is paid off. Even though it is not required by law to have home insurance, lenders can legally force borrowers to carry insurance to cover the amount of the mortgage.
So, why do mortgage companies want you to have that insurance? The lender wants to be sure its financial investment in your home is protected in the case of the home being damaged or destroyed.
Although you’re probably frustrated about being “forced” to have an expense that you’d rather not have, there are positive aspects of having home insurance that protect you, as all insurance does.
- Lowers your risk of vulnerability
Not having insurance puts you at risk for life-altering financial loss. When life-altering situations occur, causing you to have to purchase all new furniture or even rebuild parts of your house...would you be able to afford it? Are you fully prepared financially to have huge surprises that require large amounts of money? Having a form of coverage in place helps protect you from starting over from scratch.
- Dwelling coverage
If your home and any attached structures, like a deck or garage, are damaged by a covered peril, dwelling coverage helps pay for repairs. The amount of dwelling coverage you need is usually calculated by the square footage of your house and what it would cost to rebuild your home. This is not necessarily the market value of your home.
- Other structures coverage
The “Other Structures” coverage in your policy helps pay for repairs or replacement for detached structures on your property, like a fence or shed, if they are damaged or destroyed by a covered disaster.
- Personal property coverage
Personal property coverage helps pay to replace certain belongings, such as furniture and electronics, that are stolen or damaged by a covered loss.
- Personal liability coverage
If you or a family member are found legally responsible for accidentally damaging someone else's property or injuring someone, liability coverage may help pay for related repair costs and legal fees, in addition to helping with medical bills.
- Guest medical protection
If a visitor is accidentally injured at your home, your policy's guest medical protection helps pay for their resulting medical bills.
- Additional living expenses coverage
If you cannot stay in your home after a fire or other covered claim, your homeowners insurance coverage may help pay for temporary living costs, such as hotel bills.
Are there other kinds of insurance that are required when buying a home?
Every state is unique and some states do require additional insurance.
Depending on where the home is located, you could be in a high risk zone for certain disasters to normally occur. Some other forms of insurance that could be required by your bank would be earthquake insurance, flood insurance, landslide insurance, hurricane and windstorm insurance.
If you’re needing extra help during the home buying process, eHome America offers the Homebuyer Education course, which walks buyers through every detail and solid advice on how to purchase a home wisely. This includes questions about loans, finances, insurance, laws and regulations, and what to prepare after the transaction has closed.