In a world of tight budgets and increasing house payments, many people wonder how they can save a buck. There are a lot of great ways to save money, especially when it comes to owning a home. But there’s one thing you don’t want to skimp on: home insurance.
Most homeowners don’t really notice the cost of their homeowner’s insurance. This is because it’s paid out of the escrow attached to your mortgage. However, for families trying to bring their monthly payment down or those who don’t have a mortgage, this chunk of money can be cringe worthy. Yet, when you take into account everything that homeowner’s insurance protects, you might think twice about giving it the axe. Let’s take a look at all of the reasons you should have homeowner’s insurance.
Mortgage Lenders Require Home Insurance
Your house is one of the biggest investments you’ll make. It’s rare, especially with today’s values, that someone can pay cash. This means that almost all home purchase require some sort of mortgage. There are a variety of mortgage options available, but one thing is certain. The bank you buy your home through will secure the loan with the home itself.
Home insurance protects your mortgage lender’s investment. Though homeowner’s insurance isn’t required by the state like car insurance is, you’ll be hard-pressed to find someone to lend you that kind of money without insurance. The insurance protects the mortgage lender’s investment against loss or damage in a number of circumstances.
The amount of homeowner’s insurance you must have on your home usually depends on the terms of your mortgage. If the home isn’t adequately insured, then your lender may purchase a secondary policy in your name and add the amount to your monthly mortgage. So, if you think getting lower valued insurance will save you in the long run, it probably won’t. In fact, you may end up paying more.
Homeowner’s Insurance Protects Your Home from Loss
The purpose of home insurance is to provide financial protection for your home and unattached structures. Most policies include things such as damage from wind, fire, thunderstorms, tornadoes, hurricanes, and vandalism. It will cover if a portion of your house is damaged or if your entire house is destroyed. The policy will cover repairs and replacements so you can rebuild your home and your life.
You should be familiar with your policy and any policy you sign. You’ll want to make sure it pays out for damages on a replacement cost basis versus a cash value basis. This is extremely important because with a rising economy things may be more expensive to replace than you anticipated. By selecting a policy that is based on a replacement cost basis you’re getting the most financial protection available.
Home Insurance Also Covers Personal Belongings
Above and beyond just the structure of your home, insurance on your home will also cover your personal things. This is extremely important because if you were to replace every item in your home, the amount will add up very quickly. You may have gotten a great deal on that couch, but the replacement may have a high price tag. Every piece of furniture, clothing, kitchen appliance… that’s one receipt that you don’t want to foot the bill for. However, your insurance policy can help. It should reimburse you for the value of various things (depending on the policy). You always want to check with your insurance company to learn exactly what is covered and how much.
Insurance Protects Your Liability
Homeowner’s insurance is very multi-faceted. It can protect your home and contents. It can also protect you in the event that someone is injured on your property. This is called Family Liability Insurance and is standard on most home insurance policies. Often times, this portion of your insurance can extend to incidents away from home. It can help with legal and medical fees, as well as lost wages. You’ll want to speak with your insurance representative to learn if this is included in your policy and what events are covered.
Insurance Helps After a Disaster
It’s fantastic that your home insurance covers so much. But it also protects you another way. If your home is significantly damaged to the point that it needs repairs that may take a while, then your insurance may help with temporary housing. If your home is deemed uninhabitable after a storm, fire, tornado, or other covered expense, then most standard policies may cover temporary living costs. This can include hotel or other interim housing, food, laundry, storage, and internet. The last thing anyone wants after their home is destroyed is a hefty hotel bill. Thankfully, insurance helps.
Peace of Mind
Overall, homeowner’s insurance offers peace of mind. You may go your whole life and never need to file a claim. Or something horrible could happen tomorrow that has the potential to drain your bank accounts instantly. With homeowner’s insurance you don’t have to worry about the big, bad things. It can help you rebuild after storms, injuries, vandalism and more. It’s a great safeguard for your home and family.
Even if your home is paid off, it’s a good idea to still carry insurance. Paying off a home is a big deal and you don’t want all that hard-earned money to go to waste after one bad storm. Protect the value of your home with an appropriate insurance policy. Average premiums are between $300 and $1,000 per year depending on your coverage, the age of the home, and the location. They also factor in what the cost of rebuilding a house would be along with your personal property. There are a number of things that affect your home insurance policy rates and the best thing you can do is talk to someone experienced in the field.
The experienced professionals at Complete Financial Group are standing by to talk to you about your home insurance options.