If you need a loan to buy your home, you will be required to purchase homeowner’s, or hazard, insurance. The reason is simple, lenders want to know that you are protecting their investment from harm. Even without the mortgage requirement, you should carry homeowner’s insurance.
In some ways, homeowner’s insurance is the easiest type of insurance to purchase. You basically decide (1) what you want to cover and (2) how much you are willing to pay as the deductible amount on any claim.
What kind of coverage should you get? Most people purchase a general policy that covers the house and its contents. Condominium and co-op owners need their own unique policies, but they still cover the unit and its contents.
Your homeowner’s policy should cover the following 16 perils:
- Fire or lightning
- Windstorm or hail
- Riot or civil commotion
- Damage by aircraft
- Damage by car
- Vandalism or malicious mischief
- Volcanic eruption
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or steam from within a plumbing, heating, air-conditioning, or automatic fire-protective sprinkler system, or from household appliance
- Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning system, or an automatic fire-protection system
- Freezing of a plumbing, heating, air-conditioning, or automatic fire-protection sprinkler system, or of a household appliance
- Sudden and accidental damage from artificially generated electrical current (does not include loss of a tube, transistor, or similar electronic component)
Floods, earthquakes, and mud slides are never covered on a regular homeowner’s policy. A “riot of civil commotion” may or may not be covered. Since September 11, 2001, terrorist attacks, terrorism insurance has become an issue in some places. You may have to purchase separate insurance to cover each of these risks.