Why Do I Need Homeowners Insurance?
If you are buying a home and wondering, "Why do I need homeowners insurance?" be aware that homeowners insurance is more than just one of those necessary evils of homeownership. For many people, their home is the single biggest asset they will invest in. Homeowners insurance provides coverage in the event of damage to the structure of your property, personal belongings (including theft), and liability coverage - which pays for bodily injuries and property damage to other people if you are liable. Protecting your home and its contents with homeowners insurance is one of the best decisions you may ever make. Without homeowners insurance, you may be unable to afford expensive repairs and could even end up losing your home. Most people do not have the tens of thousands of dollars in their savings, or under their mattress, needed to repair a home, or even replace it, if is severely damaged or destroyed.
Sit back for a moment and imagine the financial nightmare you would find yourself in if one of the following unforeseeable circumstances occurred and you did not have homeowners insurance coverage:
A tornado or severe thunderstorm tears through your neighborhood and rips the roof off of your home, brings a tree down on your house, and destroys your outbuildings.
Lightning strikes your house and starts a fire that destroys half the structure and the majority of your belongings.
Someone breaks into your home and steals or damages thousands of dollars worth of electronic equipment, collectibles, and other valuables.
A person sues you for hundreds of thousands of dollars after they injur themselves on your property.
You will find it best to get a homeowners insurance plan that covers the cost of rebuilding your house at today's prices, while meeting today's building codes, and replacing all of the items inside. To determine how much the house itself is worth do not to use the purchase price of your home to estimate the reconstruction price. You must consider the cost of home construction today, so get estimates from a couple of different contractors to find out what it would actually cost to rebuild your home.
As far as how much coverage you will need for the actual possessions within your home, you will discover that most homeowners insurance policies factor a percentage of your homes worth to cover the inside of your house. Speak to your insurance agent if you do not think this will be enough coverage. You will need to decide whether you want your coverage to cover the cost of replacing the items, or to reimburse you for their actual value. Replacement-cost homeowners insurance does cost more, but it provides better protection. Also realize that most homeowners insurance has a capped amount for things like art, jewelry, electronics, and computers.
Finally, most mortgage companies require individuals to have homeowners insurance as a stipulation of the mortgage. Once your mortgage is paid off you can cancel your policy, but you better consider the consequences before you do so.
Why do I need homeowners insurance? Because homeowners insurance really does protect my investment. And it will protect yours as well.
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