What is Hazard Homeowners Insurance?

Your home is likely to be your largest single investment.  Homeowners insurance provides financial protection against loss.  A loss could occur by something like fire, theft of personal items inside your home, vandalism, damage to your home caused by some (not all) weather conditions, liability or legal responsibility for any injuries or property damage that you may cause or that any members of your household may cause to others.  Losses are generally explained as being sudden and accidental.  An insurance policy is not intended to be a maintenance contract.  If you neglect to properly maintain your property, don’t expect your insurance company to pay for those repairs.  Your insurance policy insures the structure itself and your personal items that you own and generally keep inside.  It will also help pay for injuries a guest may sustain at your home.

Is Homeowners Insurance mandatory?
Homeowners insurance will only be a requirement if you are still making payments on your home.  Your lender (your bank) will require that you maintain adequate insurance coverage to protect their interest in the property until you pay off the loan.  If you fail to maintain insurance on your property, your lender could put on “forced placed insurance” that is generally attached to your loan.  This forced placed insurance is extremely expensive and should be avoided.  The policy only protects the lender and their interest.  It rarely provides any coverage protection for you, the homeowner.  If you are still making payments on your home, be sure to let your insurance company or agent know who your lender is.  They will need your loan number and some other information that will allow them to update your policy.  The insurance company will automatically notify your lender that you have insurance by sending them a copy of your policy.  If you have paid off your home, having homeowners insurance is optional but still highly recommended unless you want to take on that risk and pay for any losses yourself.    

How do I know how much coverage to buy?
An Insurance Agent is qualified to assist you with that determination.  They are specifically trained to know what questions to ask you.  They also have access to online information that will provide them with property characteristics to determine the replacement cost value of your home.  Everyone’s needs are different so it’s best to let your professional help you assess your level of protection.  Remember, just because you could sell your home for $600,000, doesn’t mean that’s how much you should insure your home for.  The amount to insure your home is derived from determining the replacement value of the structure of your home.  It does not include the land.  Each insurance company has their own methods of determining this value so it is not uncommon to see replacement values at different amounts. 

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