Essentially, homeowners insurance offers protection for your home, other structures on your property and personal possessions, should you suffer damage from a covered loss. It is applicable if the property you are insuring is one that you personally live in. If you choose to rent your property, landlord insurance is better suited to providing you with the relevant protection required for a rental property.
From a legal perspective you can own a home without homeowners insurance. However, if you finance your home with a mortgage, it is highly likely your lender will require you to have home insurance to protect your home in the unfortunate situation that damage or loss occurs due to a covered peril, like a fire. Should you live in an area prone to natural disasters, such as floods or earthquakes, your lender may also insist that you protect your home with flood insurance or earthquake coverage.
If your home is a condo, you should consider taking out condo insurance. Most condo or Homeowner’s Associations require you to take homeowners insurance as the Association’s policies typically do not protect the inside of the condo but only the actual building structure of the condo complex.
You may also be required by your lender or Homeowner’s Association to purchase a homeowner insurance policy if you live in an area that has above average risk of particular hazards, for example earthquakes or severe winds.
However, even if purchasing home insurance cover is optional for you, it is something you should seriously consider as it is the smartest way to protect the significant investment you have made in your home. Such protection gives you peace of mind knowing that you will have financial assistance should the need arise. Without homeowners insurance, should disaster strike you could suffer significant financial loss – potentially for many years after the event.
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