Is Home Insurance Mandatory?

Wednesday, October 31, 2018

Families today are always trying to find ways to stretch their budgets. Some may clip coupons, some may follow a strict budget, while others try to cut down on costs where they can. Often looking at what they feel they do not need. This includes cutting insurance costs to save.

 

Many homeowner’s often wonder if they must carry insurance on their homes. While getting rid of monthly premium may provide a short-term cash flow solution, it could backfire in the event of a significant event.  But before you cancel your policy, remember while the state does not require it like auto insurance, there are situations where you will be required to have it.

 

Situations You Are Required to Have Home Insurance

 

For instance, if you carry a mortgage on your home, the lender may ask that you carry coverage as part of the loan terms. Generally, the amount of insurance would need to be at least the amount that you are borrowing for the home. The reason being if a disaster strikes, such as fire, their investment will be somewhat better protected.

 

Even if you don’t use traditional lending, and in an owner-financed situation, you might be asked to carry home insurance during the length of the loan.  While home insurance isn’t mandatory, it indeed serves a purpose. Maybe you have paid the mortgage off on your home, and you are wondering if you should still carry insurance. Let’s look it at this way, if your house burned to the ground tomorrow would you have the funds to rebuild or purchase a new home. If the answer is no, then having a homeowner’s policy in place is a wise move.

 

Understanding Home Insurance

 

First, it is essential to understand what home insurance is and what it isn’t.  Home insurance is for the big stuff; it’s not a home warranty. For example, let’s say you are having trouble with your air conditioning unit or it stops working because of age, this would not be covered under your homeowner’s policy. But may be covered by a home warranty coverage plan. However, if lightning in a storm damaged your unit, it may be covered by your homeowner’s insurance.  That is the purpose of insurance: to help protect you when unforeseen disasters like fire or storms wreak havoc on your home.

 

However, it’s not just natural disasters or fire that insurance can help protect you from. Homeowner’s insurance will also help cover you if someone is hurt on your property as well.  Maybe your child has a friend over to play. And while the kids are off playing as children do, your visitor fell down the stairs.

 

Unfortunately, during the tumble, they broke their arm. Having the proper homeowner’s coverage in place could help you cover their medical expenses. Maybe you don’t have kids, but you entertain frequently. The liability on your homeowner’s policy would kick-in for you against an adult getting injured as well.

 

Other common perils covered by most homeowner’s insurance include:

 

  • Windstorms and hail
  • Fire and smoke
  • Lightning strikes
  • Explosion
  • Vandalism and malicious mischief
  • Damage from an aircraft, car or vehicle
  • Theft
  • Falling objects
  • Water damage
  • Weight of ice, snow or sleet

 

If you are still considering rolling the dice and going without home insurance, here are some of the most common homeowner’s claims.

 

From 2012 to 2016 the following were the most common and costly claims filed by homeowner’s. Amounts are per incident.

 

  • $50,315 – fire and lightning
  • $23,010 – bodily injury
  • $9,633 – water damage and freezing
  • $8,625 – wind and hail
  • $5,052 – all other property damage
  • $4,146 – theft
  • $2,864 – medical payments and other

 

Chances are that your bank account wouldn’t survive a blow from one of these claims. Even if you own your home straight up with no outstanding loans, you would have to come up with a big chunk of change to cover repair costs. Homeowner’s insurance provides a backup plan if an unforeseen disaster strikes.

 

Final Thoughts

 

To learn more about the importance of homeowner’s insurance and how it can help protect you. Contact the professionals at protectiveagency.com at (877) 739-9367. Our licensed insurance agents will be happy to answer any questions that you may have.