Besides your workplace, your home is likely where you spend most of your time. It’s also one of the most significant investments you’ve ever had to make. So why not insure both your home and its contents? Generally, there are several benefits of insurance to homeowners. We’ve listed three of them below.
1. It helps when re-mortgaging
Unlike auto insurance or CTP, homeowners insurance might not be a state requirement. However, if you seek to fund or refinance a mortgage, your lender will most likely require homeowner’s insurance. Mortgage companies, just like banks, will always want proof of financial security before throwing their weight behind any transaction.
In this case, if you don’t already have a home insurance policy, your lender is permitted to make an insurance purchase in your name and add it up to your monthly payments. Keep in mind that homeowners insurance obtained by your lender might not be at the best rate. It might not necessarily be with your preferred home insurance company either, so it pays to do it yourself.
On some home insurance compare sites, you can look at the various costs from several insurance providers to determine the one with much coverage. It’s also worth noting that insurance providers may offer the same insurance products at different costs. As a homeowner, doing a bit of comparison-shopping can never be a miss.
2. It offers protection for much of your belongings
A standard homeowners policy doesn’t just protect the physical structure but, to a large extent, every other personal property in it. Depending on the coverage type, an insurer may pay for your personal belongings in times of loss and even medical bills for family members who get injured on your property.
There are three levels of home insurance coverage: Actual cash value, replacement cost, and guaranteed replacement cost.
- Actual Cash Value (ACV): This covers the cost of your house in addition to the cost of your personal belongings minus depreciation. This means that an insurer matches payment with the current value of your property, not its original value.
- Replacement Cost: Insurance policies at replacement cost cover the actual cash value without factoring in the depreciation of assets. With this coverage, you can replace or repair your building to its original value but not beyond your policy limit.
- Guaranteed Replacement Value: This level of coverage is seemingly the most comprehensive. In times of property damage, your insurer pays whatever it costs to get your house back, even if it’s beyond your policy limit. Usually, homeowners shop for policies enough to cover their mortgages, but that often equates to about 90% of your home’s value. In rebuilding a house after a loss, guaranteed replacement coverage cushions you for construction price hikes.
3. It helps preserve equity
Homes aren’t just resting places, they’re wealth-building resources. In 2019, many families in the United States significantly built wealth from home equity. Home equity depends on your mortgage principal and your local housing market. Usually, your equity should increase when you repay your mortgage. However, factors beyond your control may impact the desirability and value of your home on the housing market. Your home equity is likely to run down as your city’s population declines due to a natural disaster scare etc.
Therefore, getting insurance coverage is enough to protect your home investment against some of these fluctuations. What’s more, there’s a guarantee of your house bouncing back to its original glory after its loss, that’s unwavering equity for you. Given all these, homeowners insurance isn’t a luxury but a necessity.
In shopping for your home insurance company, do well to consider several other factors besides policy rates and add-ons. Especially when making insurance claims, the company’s ease of doing business and customer satisfaction matter.