Homeowners Insurance Requirements
If you own your home outright, you don’t have to purchase homeowners insurance. However, just because you don’t legally need to carry homeowners coverage doesn’t mean you shouldn’t. There are so many ways you can suffer expensive damage to your home, and you don’t want to have to come up with the kind of money needed to make costly repairs after a fire or other type of natural disaster or loss. It would be best to choose the right coverage limits to ensure you have enough protection on your home and its contents.
If you are purchasing with a home loan, mortgage lenders will require you to have homeowners insurance to protect their interests. You need the money paid to you in an insurance claim to repair or rebuild your home after you’ve suffered a loss. You may hear a lender use the term “hazard insurance,” but don’t let that confuse you. Hazard insurance is just a term that refers to the portion of a homeowners policy that covers the structure of the home. Homeowners insurance covers the structure and your contents up to a certain amount, unlike renters insurance, which only covers your contents.
There are many different types of coverage included in a homeowners policy, and you can add some policy endorsements to give you more coverage.
If you choose replacement cost coverage, the policy covers rebuilding your home to today’s standards. With actual cash value coverage, home insurance companies will only pay the policyholder the actual cash value of the home, which is the replacement cost minus depreciation. For older homes, the additional cost of replacement cost coverage might not make sense, and actual cash value would be sufficient.
You will also have personal liability coverage that protects you if someone is injured or their property is damaged at your home. If your dog bites your neighbor and destroys his new suit, the liability portion of your homeowners insurance can pay for the costs.
Medical payments to others coverage (also known as Coverage F of your homeowners insurance policy ) will pay for medical expenses if someone at your home is injured, regardless of fault. Most insurance carriers have $1,000 to $5,000 policy limits for medical payments during the policy term.
Home insurance policies pay for additional living expenses (also known as loss of use coverage) if you must temporarily relocate while repairs are being made to your home after a covered loss. Additional living expenses coverage can help pay for essentials like hotel stays, food, storage fees, etc.