If you own a home, homeowners insurance is an absolute must. In the event of an accident, your insurance policy will cover the costs of damages, medical expenses, and more.
In most cases, a mortgage lender won’t allow you to sign the contract until you have proof of insurance. They need to know that their investment is protected. If something happens to the home and you don’t have insurance, it’s their money that takes a hit, especially if you can’t pay them back.
But what does homeowners cover?
Many people confuse insurance policies with a type of warranty. While this assessment is true in some ways, it also incredibly misguided. We’re here to clear up any confusion.
What Does Homeowners Insurance Cover?
Homeowners insurance isn’t there to cover the costs of repairs, renovations, or regular home maintenance issues. It’s also not there to replace your valuables if you lose them, drop them, or otherwise destroy them. These things are only covered by insurance under certain parameters, as listed below.
Major and Additional Structures
In the event of a fire, flood, hurricane, or other natural disasters, your homeowners insurance will cover the costs of repairing or rebuilding your home. Ultimately, it comes down to what natural disasters are covered in your policy. Some insurance companies avoid covering things like flood damage if you live in an area prone to flooding, as they are a business looking to make money, not lose it.
This coverage is generally equal to the home’s value or the amount it would cost to rebuild it. Figure out what’s covered by each company to help you choose the best insurance agency.
What does homeowners insurance cover in terms of personal belongings? Generally, if the home is destroyed and you lose everything, your insurance will cover up to 50% of the home’s total value to pay for lost possessions (aside from the costs of rebuilding the home itself).
However, in other scenarios, such as theft, you can apply for compensation for individual items. Certain categories of expensive items have a limit on coverage unless you specify them in your policy.
In some cases, homeowners are forced to temporarily relocate. This can occur if you’re having major repairs done on your house after a fire, flood, hurricane, pest infestation, etc. Homeowners insurance will cover the costs of your hotel or rental.
If you decide to move permanently, this coverage should last until you get into a new home.
Personal Liability and Medical Payments
One of the basics of homeowners insurance is covering you in the event that someone in your home is injured or their property is damaged. As the homeowner, you can be held liable for these costs and sued for damages. Homeowners insurance will protect you financially and cover the costs of medical bills, lost wages, damaged items, etc.
Looking for More Homeownership Advice?
If you’re still wondering “Do I need homeowners insurance?” the answer is absolutely you do.
What does homeowners insurance cover? It covers everything in the event of a tragic accident.
Though you may not relish the idea of paying monthly insurance fees, imagine losing everything and not having coverage. It could be incredibly difficult to recover after something like that.
And if you’re looking for more information on homeownership, feel free to check out some of our other articles before you go. Our blog has a wide range of articles, covering everything from homeowners insurance to business marketing.