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Dorchester Center, MA 02124
Buying a house is one of the most significant investments many people will ever make. Protecting this investment is crucial, and having the right homeowners insurance policy can help cover the costs of expensive repairs when things go wrong. But do you need homeowners insurance? The answer depends on whether you have a mortgage.
Owning a home comes with numerous expenses, especially after a disaster. Homeowners insurance helps you recover financially from various perils that could otherwise wreak havoc on your finances, such as a storm-damaged roof, stolen possessions, or lawsuits from someone who gets hurt on your property. While having adequate coverage makes good financial sense, the law doesn’t require it. However, if you have a mortgage, your lender probably will.
Mortgage lenders generally require homeowners to maintain insurance as part of the loan agreement. Why? As long as you have a mortgage, your lender has a financial interest in your property. Homeowners insurance not only protects you but also protects them by ensuring you’re able to make necessary repairs or rebuild—and continue repaying your mortgage.
For example, if you don’t have insurance and your house burns down, you’re still responsible for the balance of the mortgage. If you can’t afford to rebuild and don’t make your mortgage payments, the lender can’t foreclose on a home that no longer exists. Homeowners insurance protects lenders from financial loss if the property is damaged or destroyed before you pay off your loan.
Lenders typically require homeowners to have insurance policies that cover 80% to 100% of the cost to rebuild the home. The cost to rebuild is not the same as the market value. Rebuilding costs may be more or less than the market value because the market value includes the land on which the property is built and is influenced by other factors such as supply and demand in the local housing market, local crime rates, and more.
Although the law may not require you to have homeowners insurance, skipping it could be a mistake. Without adequate coverage, you face the following risks:
What homeowners insurance covers depends on the policy, but it typically provides protection from various perils such as fire, theft, vandalism, wind, and more. If a covered event damages your home or possessions, your insurance policy will pay to repair or replace them up to the policy limit, once you’ve paid your deductible. Homeowners insurance generally provides the following types of protection:
However, homeowners insurance doesn’t cover every possible mishap you could experience. Every policy has exclusions. Unfortunately, 65% of homeowners don’t know what their policy covers and what it doesn’t, according to a Goosehead Insurance survey.
A standard homeowners insurance policy doesn’t cover damage from floods or earthquakes. You need to buy a separate policy for that. You may also be able to purchase endorsements to include coverage for incidents your base policy doesn’t insure. It’s crucial that you read your policy carefully to know what’s covered and what isn’t so you can make informed decisions about additional coverage you may want to purchase.
If you have questions, talk to your agent or insurance company directly so there are no unpleasant surprises if you need to file a claim.
The cost of homeowners insurance is on the rise, as average premiums clock in at $1,411, according to the National Association of Insurance Commissioners. Here are seven tips to help you save:
If your lender requires you to maintain homeowners insurance, you get to choose the policy you purchase. Skimping on coverage to save money may sound like a good idea, but it could cost you later on. A better option is to buy the most comprehensive policy you can afford while looking for ways to save on your premium.
If you’re lucky enough to own your home outright, you could skip the coverage—but it’s not a good idea. Remember, homeowners insurance doesn’t just protect your lender. It protects you, too. Without it, you’ll be on the hook for out-of-pocket expenses if disaster strikes.
At O1ne Mortgage, we understand the importance of protecting your home and your investment. If you have any questions or need assistance with your mortgage needs, don’t hesitate to call us at 213-732-3074. Our team of experts is here to help you every step of the way.