Homeowner insurance is designed to protect you from substantial financial losses if something were to occur to your property. If you have your home paid in full, then you may not be obligated to obtain a homeowner insurance policy.
However, owning a home without a homeowner insurance policy is incredibly risky. This review highlights some of the challenges homeowners could face if they were not to renew their homeowner insurance policy or delay obtaining a policy after purchasing a home in full.
The Risks You Could Face Without Homeowner Insurance
Homeowners without a homeowner insurance policy face the risk of becoming responsible for high costs related to catastrophic losses, medical costs, legal fees, and property replacement. They may also end up having to get a homeowner insurance policy anyway at a much higher rate if their home is currently under mortgage.
The Lender Could Obtain a Home Insurance Policy for You
If your home is under mortgage, then you likely are obligated to have a home insurance policy. This protects both you and the lender from large financial burdens if something were to occur to your property. If you fail to obtain a home insurance policy on your own, then your lender may take a home insurance policy and charge you for it. The policy your lender takes is likely to be far more expensive than the policy you could otherwise get on your own.
You Could Become Responsible for the Costs of a Catastrophic Loss
You may not be technically obligated to obtain a homeowner insurance policy if your home is paid for in full. For those who have the option of purchasing a homeowner insurance policy, perhaps the most obvious reason you should strongly consider a homeowner insurance policy is to help ensure you are adequately covered financially in the event a catastrophic loss were to occur. For example, if your home was destroyed in a nasty storm or as a result of fire, then you are not protected financially for the reconstruction costs of your new home.
You May Have to Pay Legal and Medical Costs Related to Liability Claims
Liability claims are one of the more common reasons for an insurance claim. This includes any issue that is raised by a third party that you may be liable for.
For example, if a local neighborhood child is playing in your backyard and gets injured, then the child’s parents may seek compensation. The legal and medical costs for claims such as this can become rather expensive, and homeowner insurance protects you financially for claims of liability.
You Cannot Recoup the Value of Stolen or Lost Property
An alarm system is a great way to reduce the risk of stolen property, but theft can still occur regardless of preparations to prevent it. If your property is stolen, then your insurance provider can cover the cost of the stolen property.
For example, if someone were to break into your home while you and your family are on vacation and steal your most valuable jewelry, then the insurance provider can replace the jewelry’s cost. Without homeowner insurance, you could risk losing tens of thousands in stolen property.
How to Determine the Type of Homeowner Insurance You Need
A lot of homeowners who elect not to get homeowner insurance do so simply because they feel they would be paying for coverages that are not applicable to them. However, many reputable homeowner insurance providers can personalize your policy so you are not paying for coverages that you do not need. In general, the coverages included in a primary homeowner insurance policy are:
- Dwelling coverage
- Other structures coverage
- Personal property coverage
- Loss of use (ALE) coverage
- Personal liability coverage
- Medical payments coverage
In other words, you are protected from most of the challenges explained in this review and much more. You can also add on to your policy if necessary to help ensure you have the coverage you need. For example, you may need flood insurance if you live along the coast and are vulnerable to water build-up around your home’s exterior.
You may also be able to reduce your premium rate if you take certain precautions to reduce the risk of filing a claim. For example, adding a home security system to protect against theft may offer discount benefits, depending on the area you live in and the insurance provider that you choose.
Mitigate Your Financial Risk With a Homeowner Insurance Policy
You can mitigate your financial risk with a homeowner insurance policy. Here at Merchant Family Agency, we personalize each policy to ensure you get the coverage you need within a budget and plan that works for you. Call us today to learn more about how a homeowner insurance policy with Merchant Family Agency can benefit you.