If you own a home, it’s likely the biggest asset you are ever going to have, so it’s very important to protect it. The way you do that is with property insurance, also commonly called homeowner’s insurance. There are a number of reasons why you need to have a property insurance policy for your home or other structure.
The main reason to have property insurance is to ensure the asset that’s worth several hundred thousand dollars or more is protected against the various perils that can occur. Homes face risk from fire, weather events such as hail and wind, and a number of other potential problems. Homeowner’s insurance even protects you against theft and provides you with coverage for personal liability.
Another reason to make sure you have property insurance is if you have a mortgage on your home. The bank that has provided you with your loan will want to protect its investment, so it will require that you carry property insurance. Usually in these cases, the bank will require you to escrow the money for the homeowner’s insurance premiums, which means it will be included in the amount you pay for your monthly mortgage and will build up gradually in an escrow account. When your homeowner’s policy premium is due, your mortgage company will pay it for you.
Even if you don’t have a mortgage on your home, either because you paid cash or you have paid off the loan, it’s still a good idea to keep property insurance. Having a policy will give you peace of mind and it will allow you to not have to worry about the potential financial burden of a damaged or destroyed property.
Financial investment is an additional reason to have property insurance. The equity you have in your home or other property is something you can borrow against or cash out through a sale. Not having insurance will make it difficult to borrow against your property, and a destructive fire or weather event could wipe out that equity, leaving you in much worse financial shape.
In addition to property insurance, there are other important types of insurance that property owners should know about and may want to consider. One is umbrella insurance, which is a type of liability insurance. Basically, umbrella insurance supplements other types of insurance, providing excess coverage if you exceed your liability coverage. For example, say someone slips and falls on your property and is severely injured. If their loss exceeds your property coverage, an umbrella policy would kick in and cover the excess.
Another type of policy a homeowner should know about is auto insurance, if for no other reason than it’s often bundled with property insurance. Bundling these two policies with the same insurance company usually lowers the premiums.
As you can see, there are many reasons to insure your property. While property insurance can seem expensive, the monthly premiums are a small price to pay for the financial security and protection that a policy provides.