Home insurance protects you from lawsuits There's always a chance a visitor could get hurt on your property, and if that injury leads to medical fees (aka bodily injury), you could be sued for damages. This type of coverage is called personal liability, and it's really important to have.
Avoid financial strain: If your primary home, detached structures or personal belongings sustain damages from a covered loss, homeowners insurance can help reduce your likelihood of withdrawing funds from a retirement account or taking out a loan to rebuild or replace your property.
Mortgage lenders require homeowners insurance because they have a financial interest in your house. They don't want you to walk away from your house—and mortgage payments—if you have no way to pay for repairs. If you live in an area that is prone to floods, your lender may require flood insurance.
Homeowners insurance will offer ongoing financial protection
Will all the money and care you've invested in your home—and life—it's advisable to guard against financial risk and always keep a homeowners policy in force.
While lower-income homeowners blame high annual costs for ditching coverage, wealthier people say they have enough cash on hand to handle rebuilding, so there's no need to pay a monthly insurance fee. That's bad thinking, advisers say.
Possibly Losing Your Home
If you're paying a monthly mortgage, you probably have no choice but to pay for homeowners insurance. If your mortgage lender requires it and discovers your home isn't insured, it could initiate foreclosure, resulting in the loss of your home.
By the end of 2021, homeownership rates in the U.S. hit 65.5%. In the U.S., 93% of homeowners have some form of home insurance.
Homeowners rolling the dice on catastrophe and other risks
At the same time, 12% of homeowners in the US do not have home insurance, according to a 2023 survey by the Insurance Information Institute (Triple-I) and Munich Re, with around half of this group reporting annual household incomes below $40,000.
Don't Downplay Damages
This might include, for example, leaving out a certain section of the damage on a walk-thru, not mentioning damaged property items you would replace anyway, or saying that the insurance company doesn't have to worry about this or that.
A mortgage is a legal and binding contract that is full of stipulations. One of which is to make sure all of your payments are made on time. Another stipulation is that you carry a homeowners insurance policy that will cover the cost of your mortgage if your home is ever damaged or destroyed.
If you have a mortgage or other home loan, keeping an insurance policy in place is likely a requirement of your loan agreement. Your lender will be notified of policy renewals and cancellations. If you fail to purchase coverage or let it lapse, your company may send your mortgage into default.
Contact your provider if you forgot to cancel your homeowners' insurance when you sold your house. You will most likely be able to negotiate at least a partial refund for the time you meant to cancel.
The requirements for a home equity loan or HELOC include sufficient equity in your home, good credit, solid payment history, proof of income, low debt-to-income ratio and proof of homeowners insurance.
Average cost of homeowners insurance by state
Homeowners in California requiring $500,000 in dwelling coverage will pay an average of $1,299 annually, but those in the state only needing $200,000 in dwelling coverage pay an average of $707.
But the fact of the matter is home insurance premiums are going up everywhere due to the increased cost of labor and construction materials thanks to supply chain issues and high inflation that started in 2020.
When your homeowners insurance policy comes up for renewal in 2024, be prepared for an unpleasant shock: You're likely to face a premium increase of 10% to 15%, and the price jump could be much higher if you live in an area where there's risk of wildfires or severe storms.
13 common policy exclusions. Standard homeowners insurance does NOT cover damage caused by flooding, earthquakes, termites, mold, or normal wear and tear. Learn about all the different home insurance exclusions and how to get covered.
The most important part of homeowners insurance is the level of coverage. Avoid paying for more than you need. Here are the most common levels of coverage: HO-2 – Broad policy that protects against 16 perils that are named in the policy.
Key Takeaways. Homeowners insurance policies generally cover destruction and damage to a residence's interior and exterior, the loss or theft of possessions, and personal liability for harm to others. Three basic levels of coverage exist: actual cash value, replacement cost, and extended replacement cost/value.
Homeowners are increasingly forgoing home insurance, gambling that the likelihood of a disaster isn't high enough to justify the cost of a policy. Some skipping insurance say they are doing so because they can no longer afford the rising premiums.
Homeowners Insurance Claims Frequency*
Each year, About one in 20 insured homes has a claim. About one in 35 insured homes has a property damage claim related to wind or hail. About one in 60 insured homes has a property damage claim caused by water damage or freezing.
Based on the most recent California Health Interview Survey (CHIS), the percentage of nonelderly Californians without health insurance dropped to 6.2% in 2022, a statistically significant decline from 2021 (7.4%). The rate of nonelderly people without coverage for a year or more also reached a historic low in 2022.
Based on data from Quadrant Information Services, the average annual cost of homeowners insurance in the U.S. is $2,417. Hawaii residents see the lowest average homeowners insurance rates at $762 annually. Oklahoma homes carry the most expensive policies, with an average annual cost of $5,839.
The national average cost of homeowners insurance is $146 per month, or $1,754 a year, according to a 2023 Policygenius analysis of home insurance premiums in every U.S. state and ZIP code.