Legally, you can own a home without buying insurance. Most lenders, however, require buyers to purchase a homeowners insurance policy. So if you intend to take out a mortgage to buy a home, the answer to the question about whether you need insurance is probably yes. The lender is technically the owner of your home until you pay off your loan. Without insurance, you run the risk of having to pay out of pocket if anything happens to your house.

How homeowners insurance works

Homeowners insurance is designed to protect consumers against unforeseen losses and damages. Typically, homeowners insurance covers damage caused by theft, fires and accidents. Additional coverage may be necessary for floods and earthquakes, particularly if you live in an area prone to natural disasters. Also, homeowners insurance protects you if someone injures themselves while they’re in your home or on your property.

Homeowners insurance may seem expensive, but you can keep your premiums low by doing minor repairs around the house and reserving your claims for major losses such as water damage.

Ultimately, your homeowners insurance policy could save you several thousands of dollars in the event that your home is seriously damaged or you experience a total loss.

You’re not required to carry insurance

Once you pay off your mortgage, you may be tempted to cancel your insurance policy. After all, there is no law requiring you to have homeowners insurance. Although you still need to consider the bigger picture and your overall financial well-being. Your home is probably your largest asset. That’s why it’s important to protect it.

Most of us don’t have enough money saved up to replace all of our furniture and belongings and pay for a new home if we lose everything in a fire. Even if you’re wealthy, carrying a homeowners insurance policy is probably something you will want to do.  

You’re liable

According to the Insurance Information Institute, about one in 1,015 homeowners policies has a liability claim related to the cost of lawsuits for property damage or physical injuries. One in 16 people were injured at home and needed medical assistance in 2014, according to the National Safety Council. That same year, there were 69,500 deaths from accidental home injuries.

Remember, your homeowners policy not only protects the structure of your home and the contents within it, but it also has built-in liability coverage. If someone slips and falls or is injured while they’re on your property, you could be sued. Since a lawsuit can be financially devastating, it’s best to have homeowners insurance (and possibly umbrella insurance).

How much you should expect to pay

Homeowners insurance costs can vary depending on where you live. The condition of your home and how much coverage you want can also impact the cost of your monthly premiums. Features like pools or trampolines could increase your insurance rates. Homeowners in states that are prone to hurricanes, hail storms, tornadoes and earthquakes tend to pay the most for home insurance.

A provider will take a number of factors into consideration when deciding how much to charge for insurance: the materials used to build the home, the age of the home, the size of the deductible, any applicable discounts, the home’s claims history and the homeowner’s credit history.

According to the Federal Reserve, the average cost of an annual homeowners insurance premium can be estimated by dividing the home’s value by 1,000, and multiplying that amount by $3.50. For example, insurance for a $350,000 house would cost about $1,225. The average homeowner spends around $1,132 on homeowners insurance premiums each year.

The average homeowner has a deductible between $500 and $1,000. But you can choose a higher deductible in exchange for a lower premium.

Bottom line: Yes, you need insurance

There are many reasons why having homeowners insurance is critical. Insurance won’t prevent accidents from occurring, but it will provide a financial safety net when the unexpected happens.

Finding the right insurance carrier is also important. Ask for recommendations based on experience. You’ll want to get quotes from different providers and compare prices as well.

Have questions about finding the right homeowners insurance policy? Want an instant quote? Speak with a Hippo specialist.


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