Why to Buy Homeowners Insurance
Your home is likely your largest financial (and most emotional) investment. Yet it is also a vulnerable one, subject to natural disasters, burglary, vandalism, and liability from injuries suffered on the property. In order to insulate your home from such financial risk, you will most likely want to buy the proper level of homeowners insurance.
Minimum Hazard Insurance
While the term varies from region to region, all mortgage lenders require homebuyers to purchase a base level of "hazard" or "homeowner's" insurance (HOI). This base level generally consists of coverage for property damage from fire, wind, hail, theft or other similar damage, though it may include more or fewer terms depending on the requirements of your lender.
Multiple Lines of Coverage
While the HOI your lender requires will cover unintentional structural damage to the home itself, it may fail to cover furnishings and other personal property, personal liability for injuries, and any other structures on the land (pool, garage, etc.). Homeowners would be wise to explore and purchase insurance which covers multiple lines of damage and/or liability.
Liability Insurance
Most standard HOI policies cover, to some extent, personal liability for injuries to others that occur on your property. For example, if a utility worker is bitten by your dog or a loose window shutter falls and injures him, a liability line of your HOI would cover the cost of his medical bills and other damages, like lost wages and rehabilitation, up to the policy limit.
Personal Property Insurance
In case of theft or natural disaster, you will also want to protect the personal property contained within the house. To this end, personal property coverage should also be considered seriously. Most standard lender insurance requirements do not include personal property, yet personal property often makes up much of the value in your home. When purchasing personal property policies, you should take a personal inventory of all of your personal property and keep a copy of the list in a safe place outside of the home (more below on home inventory).
If you have valuable works of art or jewelry in your home, there are also policies above and beyond average personal property coverage. There are also additional policies that cover natural disasters, such as tornados, floods, earthquakes, etc., which should be considered for those living in areas prone to such events.
Obtaining Homeowner's Insurance.
Homeowners insurance is an enormous industry, yet affordable coverage is getting harder to come by. According to the Insurance Information Institute, home insurance premiums went up 2.2% in 2008, after going up 5.2% in 2007. The theories for the increase vary (some blame the increase in mold damage claims, others an increase in payouts due to natural disasters), but the bottom line is that even during a prolonged housing market slump, homeowners insurance is more expensive, and is only going up.
As a result of the increase in premiums, homeowners are finding it increasingly difficult to buy homeowners insurance at a reasonable price. Prospective home buyers can seek protection in the event they can't find affordable insurance by making the home purchase conditional upon obtaining homeowners insurance at a reasonable premium.
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