Home Insurance Terminology Explained

3 Important Reasons Homeowners Insurance Is Essential (Even If It's Not Legally Required)

If you are purchasing a new home, then you can be sure that the mortgage lender will want proof that the property has a homeowners insurance policy protecting it. That said, there are no states that legally mandate homeowners insurance, so if you have paid off your home in full, you may be tempted to let your insurance policy lapse. This is usually an extremely risky decision, however, as there are a number of ways in which homeowners insurance is still essential to your financial well-being. Take a look below to learn more about just a few of the biggest reasons why.

Personal Liability

If your neighbor or someone else is injured in your home (or elsewhere on your property), it is possible that they will see you as being at fault in some way. As a result, they may choose to file a lawsuit in which they seek to recuperate damages for the injuries they have suffered, including payment for medical bills and more. Homeowners insurance policies usually cover cases of personal liability such as this, meaning that you don't have to pay out of pocket in the event that someone is hurt on your property.

Personal Property

Many homeowners insurance policies also extend to the things inside your home. Most homes contain some kind of valuable property, be it jewelry, firearms, or some kind of collectible. If your home is ever broken into and these things are stolen, your insurance policy can aid in replacing them. It is worth noting, however, that you will likely need to provide your insurance company with an itemized list of all valuables inside your home as soon as you purchase the policy. 

Additional Structures

Many people who live in suburban or rural areas have additional structures on their property. These can range from a detached garage and gazebo to a shed and guesthouse. Even if you are completely confident that you do not need protection against damage done to your home or the valuables inside it, homeowners insurance policies can pay for themselves simply by covering additional structures. After all, there is no way to recover your losses if an additional structure is destroyed and you do not have a policy; you will simply be forced to build a new one with whatever funds you have.

For all these reasons, choosing to take out a homeowners insurance policy is a wise financial decision, even if it's not the law. Contact a homeowners insurance agent to learn more.