Why You May Be Required to Carry Homeowners’ Insurance
We appreciate the freedoms we have in this country but we are also a nation of laws. These laws are generally in place for the greater good. Driving a car, for example, states require drivers to be a certain age, have a certain amount of experience and secure a valid driver’s license. Each state also has in place financial responsibility laws, usually requiring insurance coverage to drive legally.
There are situations, when you will also be required to carry homeowners’ insurance. Here are a few such examples.
When You Have a Mortgage
If you’ve borrowed money to purchase a home, you are no longer the only entity at risk should the property sustain damage. The financial organization that lent you the money also has an interest. They know that if a borrower sustains a devastating loss to a property, they are far less likely to continue making payments. The odds of them defaulting on a loan escalate considerably. That is why your bank or mortgage company requires you to carry sufficient homeowners’ insurance coverage. In the event of a near or total loss, the financial institution is assured that the property will be repaired or they will receive the proceeds.
If You Carry a Second Mortgage
Like a first mortgage, carrying a second mortgage will usually require the acquisition and timely payments on a homeowners’ insurance policy. This may not be the case if the second mortgage is small enough.
When Living in a HOA Managed Community
If you live in a community managed by a Homeowners’ Association, it is very likely the HOA covenants require owners to carry and provide proof of, individual homeowners’ insurance. This is to prevent the community as a whole, suffering loss of value from the presence of a home that has been damaged by fire or some other calamity, and the owners don’t have the funding to make timely repairs. This individual homeowners’ insurance is beyond the coverage the HOA may carry for common areas and structures.
You should also know that if you rent out your home, short or long-term, homeowners’ insurance may not be sufficient to cover damage from renters or liability claims they may create. If you are renting your home, you will need a dwelling policy or landlord policy.
While homeowners insurance may not be required by law, like auto insurance, there are circumstances where you may still have to carry it. The reality is, unless you own your home outright and do not live in an HOA managed community, you probably are required to carry it.
To get your homeowners’ policy reviewed to make sure you have adequate coverage, contact one of our independent insurance professionals. We’ll scour multiple companies looking for the best homeowners’ insurance coverage at a price you can live with. Contact us today.