What Is Homeowners Insurance and Why Do You Need It?

(Credit: Paul Kapischka via Unsplash) What Is Homeowners Insurance and Why Do You Need It?
March 29
3:55 PM 2022

Buying a new home includes a lot more than just the purchase price. Along with the mortgage and other details, it's crucial to purchase homeowner's insurance. Homeowner's insurance is designed to help protect the homeowner from various things that could happen, ensuring the money is there for repairs, dealing with lawsuits, and other major problems that could come up. When something does happen that is covered, the insurance policy will cover the cost, saving the homeowner a significant amount of money. 

What Homeowner Insurance Covers

When buying insurance for home, check to see what is covered before purchasing a policy, as they can vary. Often, homeowner's insurance will include coverage for catastrophic events, damage to the interior and exterior of the home, and potential lawsuits the homeowner may face. The coverage amount will vary based on how much coverage the homeowner purchases, though there are add-ons that can extend the coverage if needed. 

What Homeowner Insurance Doesn't Cover

Homeowner's insurance doesn't cover everything, though. If there is a leaking pipe that damages the home, the insurance policy will likely cover the water damage. It will not, however, cover the broken pipe. That's up to the homeowner to fix on their own. Coverage also may not apply for certain situations that were directly caused by the homeowner, such as intentionally damaging the home in an attempt to get it restored via insurance. In most cases, flooding is not covered and requires an additional policy. 

Dealing With Catastrophes

Catastrophes include weather-related damage, fires, water damage, and more. If there's a major storm and lightning hits the home, anything damaged by the lightning will likely be covered. If there is damage to the roof because of a storm or the kitchen suffers from a fire, the insurance company should cover the repairs. Homeowners should read through a potential policy to make sure it will cover any possible catastrophes before they happen. 

Dealing With Lawsuits

If someone is sued for specific reasons, legal representation and damages may be covered by a homeowner's insurance policy. This typically applies to personal injury cases, such as when a person is injured on the property. For this reason, there may be restrictions on pools, trampolines, pets, and more. If someone is bit by the homeowner's dog, even if it's not on the property, it still could be covered under the homeowner's insurance. 

The Alternative to Homeowner's Insurance

Unless specified by the mortgage company when purchasing the home, homeowner's insurance isn't required. Homeowners do have the option of skipping it, but the only alternative is to pay for repairs, damage restoration, and lawsuits out of pocket. Doing this could prove to be incredibly costly, so it's not recommended. The cost to repair a home damaged by a fire averages more than $45,000, and can be significantly higher if the entire home is destroyed. Since most homeowners do not have enough money on hand to rebuild the home, it's not recommended to skip homeowner's insurance. 

Buying a home is a major expense. What if something happens to it? It's better to be prepared and know how to handle the situation. For this reason, it's a good idea to purchase homeowner's insurance. Be sure to read through the policy carefully to understand what is covered and what needs to be done if anything does happen.

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