One of the first concerns of new homeowners is home insurance. This makes sense, as we all want to protect our brand new homes. One of the questions that is most commonly pondered by people who recently bought a new home is “Are we mandated to buy homeowners insurance just because we now own a home?”
Homeowners Insurance differs from auto insurance in that the law does not require people to buy homeowners insurance in most cases. Again, this is the situation in most cases, but there are certain reasons that you could require you to buy homeowners insurance.
You are likely to need homeowners insurance if your home was financed with a mortgage, as many lenders require it. Since a lender has invested so much money into your home, they require homeowners insurance to offset the risk of any disaster that could cause significant damage. You could also be required to have earthquake or flooding insurance to get a loan. This is typically only if the home is located in an area that is highly likely to have an earthquake or flood. Another situation where you might be mandated to have homeowners insurance is if your owned home or condo is part of an association that requires it. It is important to note that you can opt out of buying homeowner insurance once you have paid off your loan.
If you don’t fall into any of the categories above, you probably are not mandated to buy homeowners insurance. However, that does not mean that it is unnecessary or that you should overlook the importance of a strong homeowners insurance policy. There are two main factors to consider when contemplating your need for homeowners insurance.
The first factor that requires immediate thought is whether or not you will be able to replace your home in the event of a disaster. What would happen if there was an unfortunate occurrence, such as a fire? If your home was destroyed entirely by a fire, or any other natural disaster that is out of your control, would you be able to afford replacing it? For most people, the answer is no. We would all like to think that such tragic events are never going to impact us directly; however, the truth is that people lose their homes to events like these every day. If you can’t imagine how you would replace your home in this situation, you should be seriously considering home insurance coverage.
The second factor that plays a large role in many decisions to purchase homeowners insurance is the possibility of a lawsuit. Did you know that homeowners insurance will cover anyone who is injured on your property? If someone were to get injured at your house or on your property in general, could you handle the costs of a lawsuit without insurance? This is an additional reason for the importance of homeowners insurance.
Whether you are a brand new homeowners or someone who simply has not invested in homeowners insurance yet, you should seriously consider the value of a homeowners insurance policy. Just because it may not be mandated by law, does not mean that home insurance is not crucial to protecting your home and family.