Homeowners insurance is a bundle of coverages (in a single policy) that can protect homeowners from unexpected damage or loss from events such as weather, theft, or vandalism. It provides relief in the form of cash or replacement of the home's contents and the structure itself. It provides liability coverage against claims from others who may have suffered damage on your property. It also provides coverage for the use of the home.
Is homeowners insurance required by law?
Unlike car insurance, homeowners insurance is not required by law. However, homeowners insurance becomes mandatory when you take out a mortgage because the bank requires it. In fact, it is the bank's legal right to require customers to purchase insurance before allowing them to borrow against their home. Furthermore, in certain cases, condominiums can also require mandatory homeowners' insurance for all tenants, if the bylaws so require.
How much does homeowners insurance cost?
Homeowners insurance costs depend on a number of factors, including the coverage you select, the features of your home, and the value of your belongings. There may also be additional costs for additional coverage or increased coverage limits.
Dangers covered
Hazards covered in basic form:
- Fire
- Lightning
- Windstorm or hail
- Explosion
- Smoke
- Vandalism
- Collision of an aircraft or vehicle
- Riot or civil commotion
Dangers covered in an expanded form:
- All basic damage
- Burglary, damage from break-ins
- Falling objects (e.g. tree branches)
- Weight of ice and snow
- Freezing pipes
- Accidental water damage
- Artificially generated electricity
Hazards specifically excluded:
- Legal ordinances
- Earthquake
- Flood
- Power failure
- Negligence
- War
- Nuclear risk
- Intentional acts
What is property insurance?
Property insurance is a generic term for a variety of policies that provide property protection or liability insurance to homeowners. Property insurance provides financial compensation to the owner or tenant of the building and its contents in the event of damage or theft. If the owner or tenant is injured on the property, it provides financial compensation to someone other than the owner or tenant. Property insurance can include many policies, such as homeowners' insurance, renter's insurance, flood insurance, and earthquake insurance. Personal property is usually underwritten by the homeowner's or renter's policy. The exception is high-value and expensive personal property, which is usually covered by purchasing add-ons called "supplemental insurance." If there is a claim, the property insurance policy will compensate the insured for the actual value of the damage or the replacement cost to repair the problem.
