Do You Need Home Insurance?
You may wonder why do you need home insurance if you have a mortgage. The lending institution requires borrowers to carry an insurance policy to protect the bank’s interest in the collateral of the loan, which is the home. The bank is listed as the interested party on the insurance policy, and in the case of a claim, the insurance company may write the check to both the homeowner and the bank. This is to protect the bank’s interest and ensure that repairs are done to the property.
You may also wonder why do you need home insurance if your home is paid for, and there is no mortgage holder. There are many reasons to continue to carry homeowner insurance once your home is paid off and the lien has been released.
Some of the main reasons to continue to carry a homeowner policy on your property include perils such as fire and weather related incidents. Even a basic homeowner policy will cover fire, wind or lightning damage. It will also cover riots and falling planes. While the home insurance policy will not cover floods, it will cover water damage that comes in from a hole in the roof. Earthquake damage is usually not covered either.
A typical home insurance policy will cover both the structure and contents. Contents are usually listed as a group and given a value that is paid out when a claim is filed. A structure can include outbuildings and detached garages and may include fencing or other fixtures on the property. It will not cover trees or landscaping, but there may be an inclusion for tree removal after a storm.
Each policy is written specifically for the area the home is located in, so there may be provisions or exclusions dependent upon the state’s requirements. Generally, the state has a department or commissioner that oversees the insurance regulations for that state, and the guidelines are dependent upon the state’s legislators.
A homeowner insurance policy will have a deductible, and in some cases, like the state of Florida, there is a separate deductible for hurricane damage. All deductibles are calculated per incident, which means multiple claims can create multiple deductibles that need to be met before the insurance company is required to pay anything towards the claim.
A homeowner policy also includes property theft and a liability portion that covers medical expenses if someone is injured on your property.
Disclaimer: This is for information purposes only and NOT a recommendation from Mills Insurance. Please contact a licensed insurance specialist to discuss insurance coverage’s and laws.