There is no law that says you must buy homeowners insurance like the law that requires you to buy auto insurance if you own and operate a vehicle.
So why do you buy homeowners insurance? Could the answer be that you want peace of mind in case of a major catastrophe?
Your standard homeowners insurance policy extends coverage to your home (as property) for certain perils. A peril is a term used in the insurance industry to describe certain events that occur.
The Purpose Of Your Homeowners Insurance
To Buy You Peace of Mind
- If your home burned to the ground, would you have enough money to rebuild it? Most people do not have that much money available; which is one of the reasons why you buy a home insurance policy.
- An insurance policy is ready to pay out on a claim in case you do have a catastrophic loss such as a house fire.
To Pay For Covered Perils
- Here’s the list of perils that are covered in most homeowners insurance policies : fire, lightening, wind, hail, explosion, riot, smoke, aircraft, theft and vandalism.
- Those perils can sometimes cause large losses to your property.
To Pay For Large Losses
- You want your homeowners insurance policy available to pay for any large loss that you may incur.
- A large loss can maximize your policy limits.
- Maximizing your limits means that you spent up to the policy limit within your home insurance policy.
- Selection of policy limits determines whether a large loss is covered or not to the full value.
- If your home is insured for $300,00 that is your policy limit. If you have a claim and it will cost $400,000, the insurance policy will only pay up to the policy limit of $300,000.
Saving Money on Home Insurance
- Don’t ever cheat yourself on coverage by lowering the insured limits hoping to save a few dollars.
- To save a few dollars by carrying low limits just harms you in the long run.
- A better way to save some money is to raise your deductible.
- Another way to lower your insurance premiums would be to have a good credit score.
- A good credit score is a score above 750.
- If your credit score is below 750, look at getting some credit repair help.
- Credit repair help could actually help reduce your insurance premiums.
- Insurance companies take credit scores very seriously.
To Pay For Liabilities
- Liability coverage is included within a standard homeowners insurance policy.
- Each policy has a standard limit that can be increased at the time of purchase.
- Liability coverage includes bodily injury and property damage to another person outside the residency insured. In other words, coverage for bodily injury from your child hitting a neighbor’s child.