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Do I need homeowners insurance?

Your home is one of your most important and valuable investments, and you deserve to be sure that investment is protected in the event that something unpredictable happens. That's what homeowners insurance is for. You pay a monthly premium in exchange for the assurance that your insurance provider will cover a predetermined portion of the costs of damage to your house.

Here are a few of the main reasons why you need it.

Your lender most likely requires it

It's extremely rare that a real estate transaction occurs without a bank's involvement, and it's also rare that a bank won't require homeowners insurance to finalize the terms of the mortgage.

It makes sense. When you sign a mortgage agreement, your bank agrees to pay the price of the home upfront and let you pay it back over a period as long as 30 years. With interest, the lender is coming out on top over the entirety of this period, but for at least the first decade, the bank retains most of the financial stake. If something were to happen to the home, your mortgage lender would be out a lot of money.

If your house burns down, it's more than a source of trauma in your life. It's the loss of a valuable asset for your mortgage lender, and they want to verify that a homeowners insurance policy is in place to protect that asset.

And, if you've paid off your home and you retain full equity in it, you now have 100% financial stake in the security of your property. You can't afford to live without assurance that it's protected from all forms of risk.

Your homeowners policy may cover more than you think

One of the reasons why having homeowners is almost certainly in your best interest is that a standard homeowner's policy may cover more than just the structure of your home. Here are some additional coverage areas you may find in your policy:

  • Coverage for garages, sheds, and other structures
  • Coverage for your personal property: In the event of a break-in, your policy may cover both damages to your home and the value of the stolen property.
  • Premises liability coverage: If you or a family member accidentally injure someone else on your property, your homeowner's policy may cover a percentage of the damages
  • Additional living expenses: If your home is damaged in an accident or fire, your insurance company may pay some of your living expenses for a certain period of time.

Who should have this coverage?

If you own a home, whether you're a first time home buyer or you've paid off your mortgage, it doesn't matter. A house is a huge investment, and you need assurance that it's protected, no matter what.