Legally, you might not need home insurance. But if you have a mortgage, your lender almost definitely requires it. Let's take a look at the situations where you may be required to get coverage.
Who needs homeowners insurance?
Not everyone needs homeowners insurance and it's not required by law, but it's fair to say that the vast majority of people who own homes need insurance to protect their investment.
One reason people need home insurance is because they have a mortgage. If you have a mortgage on your home, then you can expect your bank to require you to provide proof that you have purchased adequate homeowners insurance.
Similarly, your neighborhood homeowners association could require you to purchase a homeowners insurance policy that shows you have certain coverages. This is particularly common for homes in areas that have high risk for certain hazards, such as earthquakes or severe winds.
But even if you don’t have a mortgage, you may still need a homeowners policy to protect your finances. If you’re not confident that you'd have the funds to repair major damage or rebuild your home after a catastrophe, then it's wise to purchase home insurance.
Consider the cost of repairing your home after a simple kitchen fire. Could you afford to put your kitchen back to the way it was without risking your financial security? Now imagine the destruction that could be caused by a larger scale fire, severe storm, tornado, or hurricane.
Home insurance may help you repair or rebuild your home and replace your belongings in all of these situations. Policies contain dwelling coverage, which pays for repairing the physical structure of your home. They also include coverage for other structures like detached garages or sheds. Home insurance also covers your personal property when it's lost or damaged after a covered event.
In addition to property losses, homeowners may face claims for negligence at times. If someone gets hurt on your property or your child or pet causes someone’s injury or property damage, then you may need to pay for the injured party's property repairs or medical bills. To help in these situations, home insurance can provide personal liability coverage.
Who doesn't need home insurance?
Homeowners insurance isn't necessary for everyone. For example:
-
People who rent out their homes. Leasing your home to others, even in some short-term situations, means you likely need landlord insurance, rather than traditional homeowners insurance.
-
Condo owners. Owning a unit in a condominium means you need condo insurance that works in tandem with your condo owners association’s master policy. The master policy typically covers common areas of the complex and structural elements of the building. Individual unit owners need insurance that covers the interior of their units and other items as spelled out by the condo association's bylaws.
-
Renters. People who rent don't need homeowners insurance. Instead, they purchase renters insurance that covers their personal property but not the building that they live in. The building is covered by the landlord's insurance.
Long story short? Home insurance may not be for everyone, but insurance definitely is. If you have valuable assets of any kind, take a moment to consider what you’d be out if the worst case scenario actually occurs – and then talk to an insurer to get the protection you need.
