July 28, 2021 Cody Marchant

Homeowner’s Insurance: Is it Required and How Does it Work?

As a new homeowner, an established homeowner, or even a renter – it’s crucial to have a policy that protects you from various unexpected events.

Regardless of popular belief, homeowner’s insurance protects much more than your home. And whether it’s required or not, it’s wise to have homeowner’s insurance for your protection.

Let us walk you through the basics of homeowner’s insurance policies and how they work.

What is Homeowners Insurance? 

Homeowner’s insurance is a policy that protects your home, personal property, and more against certain damages and theft. Homeowner’s insurance coverage for the total fair value of the property is required for anyone with a mortgage.

These policies usually cover damage and destruction to the interior and exterior of a home. But they also cover the loss of personal possessions and personal liability. Most people don’t realize that you don’t have to own the house to need insurance. Many landlords require tenants to have renter’s insurance – which is essentially the same as homeowner’s insurance.

There are three basic levels of coverage:

  • Actual cash value
  • Replacement cost
  • Extended replacement cost/value

Actual cash value coverage will cover your home plus the value of personal belongings. Replacement policies cover enough for repairs to the original value. Lastly, guaranteed replacement coverage includes inflation costs so that you can rebuild or repair even if it’s more than your policy limit.

What Does Homeowner’s Insurance Cover? 

You can purchase different types of insurance coverage, but generally speaking, policies cover personal possessions at 50%-70% of your home’s coverage. Fire and theft are always covered under homeowner’s insurance. However, there are other events that many policies will cover as well, such as:

  • Mold damage
  • Roof leaks
  • Water damage
  • Plumbing issues
  • HVAC issues
  • Foundation repair
  • Fences  
  • Outdoor buildings
  • Decks/porches

How Does Homeowner’s Insurance Work? 

If you purchase a homeowner’s insurance policy and maintain it by making premium payments, then it’s pretty simple to get things fixed when or if needed.

If unexpected events occur and your home or personal property sustains damage, then you must file a claim. Depending on the company you chose for the policy, a claim can usually be made online or in an app. If not, then you will have to work with your agent in person or over the phone.

You’ll answer questions related to the damage, how and when it occurred, and the cause. Before sending the payout, the insurer will probably request detailed images of the damage or have a claims adjuster inspect the damage. Once the claims process starts, it’s the insurance provider who determines the next steps.

Is homeowner's insurance required

Am I Required to Pay Homeowner’s Insurance? 

Homeowner’s insurance isn’t required by law, but that doesn’t mean you won’t be required to get it. If you have to have a mortgage, your lender may require homeowner’s insurance to protect their investment.

Even if your home is paid off, it’s best to obtain homeowner’s insurance. Most homeowners can’t afford to rebuild or make significant repairs if their home is damaged or destroyed. Even if you have the money saved to make repairs, a homeowner’s insurance policy costs much less than rebuilding out of pocket.

Get a Free Quote on Homeowner’s Insurance 

Policy rates are primarily determined by the risk factor of you filing a claim. Insurance companies will assess this risk based on the home’s condition, past claim history associated with the house, and the neighborhood or local community.

When shopping for a policy, it’s essential to get quotes from multiple sources. Loan Compass can help you get free quotes from a variety of insurance companies! In addition, we have partnered with Hippo, a company that provides personalized concierge service with 25% below market rates!  

Fill out this form for a free instant no-obligation quote