Why You Need Homeowners Insurance

Your home is your castle, so the saying goes. In order to protect it, people purchase homeowners insurance, one of the most popular forms of insurance today. Of course, if you have an outstanding mortgage on your home, chances are you had no choice--your lender required you to secure homeowners insurance before the loan was approved. But if the choice is up to you, remember that homeowners insurance provides important benefits. A few hundred dollars a year can buy you a hundred times that in peace of mind.

The three benefits of homeowners insurance include:

• protecting your home,
• protecting your personal property, and
• providing liability coverage.

Your house
The main purpose of homeowners insurance is to protect your home (and other structures, like a shed or detached garage). This coverage is the bread and butter of any homeowners policy. Your house is often the most important investment you'll ever make, and even a relatively small amount of damage may set you back financially if you don't have insurance, or don't have enough insurance.

Take the following scenarios:

• Lighting strikes a power line leading into your house, causing a fire.
• A delivery truck careens off the road into your house.
• Your hot water heater explodes.
• A tree falls through your roof during a storm.

With the typical homeowners policy, you are covered in each of these situations. You don't have to worry about the unpredictable. The financial problems created by random accidents and perils will not force you out of your home.

Not only will your policy cover the cost of the damage (exactly how much depends on your policy), but also it will cover (up to a limit) your living expenses in makeshift quarters while you wait for your home to be repaired.

Personal property
In addition to protecting your home, the typical homeowners policy covers your personal property as well. Your personal property consists of the contents inside your home--for example, furniture, clothing, stereo, computer equipment, jewelry, and sentimental items--as well as outdoor items like sporting equipment and lawn tools. So if a fire damages both your kitchen walls and your appliances, your appliances will be covered.

An important aspect of homeowners insurance is that its coverage is not limited to property damaged on your premises, but applies to your personal property anywhere in the world. This is known as "off-premise protection". If you travel now or ever intend to travel, this protection can be invaluable. In sum, if you value your personal possessions, the personal property coverage of a homeowners policy can be very important.

Liability coverage
In addition to insuring your property, the typical homeowners policy includes a specific level of liability protection that covers you for damage you cause inside or outside of your home. Unlike the random perils that govern your property (e.g., fire, explosion, theft), the trigger for this coverage is your negligence and, unfortunately, the "I'll see you in court" mentality. Included here are medical payments to third parties, and your legal costs for any lawsuits brought against you. The importance of this coverage may not be as obvious as that of property coverage. Nevertheless, it may protect you against potentially troubling personal injury lawsuits. For example: you invite your neighbor over for coffee, and she trips and breaks her leg on a pair of shoes you left in the middle of your floor. Your insurance will cover her medical bills and other costs (the ceramic vase she was carrying) if you're held responsible. Or, away from home, suppose you run over someone's foot with your golf cart on the way to the clubhouse. Your insurance will cover the injured person's medical bills if you're found liable.

What is covered?
The most typical homeowners insurance policy in the United States is referred to as the "HO-3" policy. Among other things, it commonly provides coverage for damage resulting from:

• Fire and lighting
• Windstorm and hail
• Explosion
• Theft, vandalism, or malicious mischief
• Damage from vehicles
• Sudden and accidental damage from smoke
• Objects falling from sky (meteorite, airplane etc.)
• Weight of ice, snow, and sleet
• Accidental discharge or overflow of water from your plumbing
• Freezing of plumbing
• Sudden and accidental tearing, cracking, burning, or bulging of a steam or hot water heating system
• Your personal property
• Your negligent and unintentional act, whether on or off your premises

In fact, with the HO-3, every calamity is covered except those that are specifically excluded in the policy. The standard exclusions in the HO-3 policy are:

• The land under your house
• Floods (this insurance must be purchased separately)
• Earthquakes (this insurance must be purchased separately)
• War
• Nuclear accident
• Intentional damage
• Sewer backup or overflow
• Structures used for a business (this insurance must be purchased separately)
  wear and tear on a home, including deterioration, insect and rodent infestation, settling, cracking, bulging, or expansion of pavement, walls, or foundations, or damage from domestic animals
• Cars, trucks, vans, motorcycles, aircraft, and boats with anything more than a small motor
• Theft from a house under construction (this insurance must be purchased separately)
• Freezing of pipes in an unoccupied, vacant, or under-construction house
• Vandalism and malicious mischief if the house has been vacant for more than 30 days
• Freezing, thawing, pressure, or weight of water or ice to a fence, pavement, patio, swimming pool, or dock
• property belonging to tenants
• animals, birds, and fish
• losses resulting from the failure to protect property after a loss

Keep in mind that you can always add available additional endorsements to complement standard coverages.

Learn More...

Overview | Understanding The Basics | Types Of Insurance | Coverage Amounts
Choosing A Policy | Filing A Claim | Other Types Of Insurance | Home Safety Tips
Planning Concerns | Home Glossary

Please Note: The information contained in this Web site is provided solely as a source of general  information and resource.  It is a not a statement of contract and coverage may not apply in all areas or circumstances.  For a complete description of coverages, always read the insurance policy, including all endorsements.