Do You Really Need Home Insurance?
Home insurance is a popular insurance scheme that people take out alongside schemes like auto insurance, health insurance and life insurance. While home insurance can save some people a lot of money in a disaster, it can be a waste of money for others. This guide looks into whether you need home insurance.
Is home insurance a requirement?
Home insurance isn’t a legal requirement in the same way that auto insurance is if you’re a driver. However, when buying a house, you may find that many mortgage lenders will want you to take out homeowners insurance, and may not lend to you unless you do.
If you’ve paid off the mortgage on your home, any home insurance scheme you have in place will no longer be required, but you can continue to stay insured if you’d like.
If you rent a property, home insurance usually won’t be a requirement. In fact, you won’t be able to take out building insurance, as you don’t own the building (besides, the landlord should already have insurance in place). Contents insurance is something you may still want to look into to protect your belongings – this is voluntary when renting most properties.
What does home insurance cover?
Traditional home insurance covers damage to the building from events such as fire, theft, vandalism and natural disasters (such as floods and storms). It should also include loss of possessions as a result of these events (contents insurance will only cover your possessions and not damage to the building).
When it comes to repairing wear and tear in your home, you generally won’t be covered. If a pipe bursts or an old roof collapses, you’ll likely have to consider other funding options such as emergencies savings or personal loan companies. Similarly, if damage is inflicted by you or another occupant, you won’t be covered for it (such as your kid accidentally breaking a window with a ball).
Different home insurance companies will offer different levels of cover. Nowadays, you can customize your plan to include the specific types of damage and loss that you feel are worth insuring against.
How big are the risks?
When deciding whether to take out home insurance, you should spend time weighing up the risks. If you live in an area with high crime rates or live by a river, you may be more at risk of disasters such as burglary or flooding. It could therefore make sense to take out home insurance. You may not feel the same way if you live in a gated community in a nice area or if you live in an area that isn’t affected by any natural disasters.
It’s worth noting that regular home insurers may turn away properties that are deemed to be too ‘high-risk’. This could include trying to insure a property that has already been burgled twice or trying to insure a home in a high-risk flood zone. There may be specialist insurers out there that are still willing to cover you but it may not always be worth the high rates. Your best solution is instead to invest in preventative measures such as installing a burglar alarm and security camera or flood-proofing your home.