What is homeowners insurance and do I need it?

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As a potential homebuyer, you probably have plenty of questions. We tried to cover a lot of them in our Checklist for First-time Home Buyers.

In this post, we’ll cover the following topics:

But a common question that even experienced buyers ask is: what’s the deal with homeowners insurance, and do I need it? 

So, what is homeowners insurance?

Homeowners insurance provides coverage for your home in the event of certain losses. For instance, if your home is burglarized or damaged by a cause covered by your policy, homeowners insurance can help you replace your belongings or repair your home. Homeowners insurance may also provide liability coverage, which can protect you if someone is accidentally injured on your property.

When should I consider buying it?

Many mortgage lenders require evidence of coverage to provide a loan for your home purchase. If you have an offer on a home and are using a loan, it’s a great idea to give yourself time to comparison shop rather than waiting until the last minute!

Even if you’re not using a mortgage and aren’t required to buy homeowners insurance, it’s still a good idea if you want to protect yourself against some of the losses discussed below.

What does homeowners insurance cover?

An important thing to remember is that each homeowners insurance policy varies. Experts recommend you compare policies in deciding on the level of coverage you need. Some typical situations a homeowners insurance policy may cover include:

  • Property damage: If your home or related structures like fences or sheds are damaged, this coverage can potentially help compensate you for repairs or rebuilding. Perils like lightning are often covered, but other hazards such as earthquakes and floods are usually excluded.
  • Personal property loss: This coverage is for damage to or theft of personal property. If your personal property is very valuable, you might want to add additional coverage through supplemental “riders” or special endorsements on your policy.
  • Personal liability: If you, your family member, or your pet accidentally causes bodily injury to someone else, or someone is accidentally injured on your property, then your homeowners insurance can typically protect you against financial losses if you are sued and held legally responsible for the injuries or damages. There are exclusions, such as intentional acts by the homeowner, so it is important to fully understand your policy’s liability coverage.
  • Loss of use: If your home becomes uninhabitable, your homeowners insurance can help pay for alternative living arrangements while your home is being repaired or rebuilt. Compare policies carefully, as this may already be part of your policy or it may be an optional coverage that you may want to consider adding.

Where can I compare policies?

These days, thankfully, you can compare policies online.  Hippo is one of many companies that offers this service, and they aim to make the process fast and convenient for busy homebuyers. To get started, just enter your address on www.myhippo.com and Hippo will present you with a list of quotes and coverage options.

Final thought

Homeowners insurance can help protect your most valuable asset from unexpected circumstances like fire or theft.

Whether you’re already a homeowner or planning to buy a home, knowing your homeowners insurance options is a smart financial decision.

September 24, 2018 — by Tiffany Chi