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Why Do I Need Homeowners Insurance?

Updated: February 2018

Whether you're buying a new home or you've already paid off the mortgage, you may have wondered about the value of home insurance. Do you really need it? Your home is likely one of, if not the most, valuable assets you have. Homeowners insurance helps protect that investment — and you — in a variety of ways.

Here are some of the key reasons it's important to consider having homeowners insurance.

Homeowners insurance policy.

HOMEOWNERS INSURANCE MAY BE REQUIRED

In some cases, a homeowner may be required to have homeowners insurance. If you have a mortgage, your lender is most likely going to require that you have homeowners insurance, says the Insurance Information Institute (III). Before funding your mortgage or refinancing, the mortgage company will typically ask you to provide proof that your home is adequately insured. That's because the lender wants to be sure its financial investment in your home is protected should it be damaged or destroyed by a fire or certain other risks. A local agent can help you buy a homeowners insurance policy that fits your needs.

If you don't have a homeowners insurance policy, the Consumer Financial Protection Bureau states that your lender is allowed to buy insurance and charge you for the cost. Keep in mind, however, that the policy the lender obtains may be more expensive than what you can purchase on your own and offer more limited coverage.

A suburban home.

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HOMEOWNERS INSURANCE PROTECTS MORE THAN YOUR HOUSE

While a standard homeowners policy helps provide protection for your house, its coverage typically extends to more than the physical structure of your home. From your personal belongings to the shed in your backyard or even medical bills if a guest is injured on your property, a homeowners insurance policy may include coverage for:

  • Your dwelling.
    If your home and attached structures, like a deck or garage, are damaged by a covered peril, dwelling coverage may help pay for repairs.
  • Other structures.
    The other structures coverage in your policy may help pay for repairs or replacement for detached structures on your property, like a fence or shed, if they are damaged or destroyed by a covered peril.
  • Personal property.
    Personal property coverage may help pay to replace certain belongings, including furniture and electronics, that are stolen or damaged by a covered loss.
  • You and your family.
    If you or a family member are found legally responsible for accidentally damaging someone else's property or injuring someone, liability coverage may help pay for related repair costs, legal fees and medical bills.
  • Guests.
    If a visitor is accidentally injured at your home, your policy's guest medical protection may help pay for their resulting medical bills.
  • Additional living expenses.
    If you cannot stay in your home after a fire or other covered claim, your homeowners insurance coverage may help pay for temporary increased living costs, such as hotel bills.

Homeowners Insurance Limits and Deductibles

It's important to keep in mind that all coverages come with limits — the maximum amount your policy will pay out after a covered loss. When selecting your coverage limits, be sure to take into consideration things like the potential cost of rebuilding your home or replacing your belongings if they are damaged or destroyed by a fire or other covered peril.

Remember, too, that many coverages have deductibles. Your deductible is the amount you'll pay before your insurance benefits kick in to help reimburse you for a covered claim.

Having a home insurance policy won't prevent damage to your home or belongings, but it may help provide a financial safety net should the unexpected occur. If you have a homeowners insurance policy in place, you may be better equipped to weather a storm or crisis — knowing that your homeowners insurance may help cover the cost of damage and get on your feet again.

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This content is for informational purposes only and may not be applicable to all situations.

Coverage subject to terms, conditions, and availability. Policy issuance is subject to qualifications. Allstate Insurance Company, Allstate Indemnity Company, Allstate Fire and Casualty Insurance Company, Allstate Property and Casualty Insurance Company, Northbrook, IL. © 2018 Allstate Insurance Company, Northbrook, IL.
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