Who Needs Homeowner Insurance?

InsuranceLecturer — Quite frankly anyone who owns a home needs homeowner insurance. Home ownership ranks nationally as the number one personal investment.

If you own your home, free and clear of any loans, it is a wise policy to insure this investment against risks. Lending institutions require the new homeowner or the homeowner refinancing a home to purchase homeowners insurance.

Failure to do so will prevent your loan from closing or, in the case of an existing homeowner, results in default of the conditions of their loan. While a homeowner should not rely exclusively on the coverage levels required by the bank or mortgage company, the homeowner’s insurance policy must at least meet these minimums to prevent default.

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The homeowner should know that the levels of insurance required under the mortgage contract are usually designed to protect the only the house itself. These levels of insurance will not necessarily protect your possessions and will not even protect the house under certain occurrences such as earthquake and flood.

While the loss of your home by fire is covered by homeowners insurance, most homeowners do maintain the right amount and type of coverage. For example, the Northridge, California earthquake of 1974 created over $40 billion in total losses.

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But according to the California Insurance Commissioner’s office only about 38 percent, or $15 billion of the claimed loss was actually insured. That is why it is important for the homeowner to check with his or her insurance agent, to make sure adequate protection and coverage has been provided in each individual’s situation.

Homeowner insurance is one of the most important and prolific forms of insurance available on the market today. The homeowner’s policy generally has two main sections.

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Section I covers damage to the physical property, whereas, Section II provides personal liability coverage against lawsuits arising from occurrences that result in other persons being injured on the property.