Why Do I Need Homeowners Insurance

Why do I Need Homeowners Insurance?

If you’ve just bought a home or are thinking about buying a home, you may be looking at the average costs of homeowners insurance and thinking, Why do I need homeowners insurance, anyway? Well, there are several reasons that you probably want to think about investing in homeowners insurance; for the most part, really, it’s a must. It’s just one of those things in life that you can’t get by without. But if you’re still sceptical, here are a few reasons that you need homeowners insurance.Home Insurance

You’re Making a Huge Investment

For most people, a home is the biggest investment they’ll every make, so chances are likely that you’ll fall into this category. Even if your home is worth less than other parts of your financial portfolio, it’s still going to be a huge investment, and you need to protect that investment.

Think about it. Let’s say you’ve just paid $100,000 cash for your new home (not very likely for the most part, but it could happen!), so now you’re pretty much cleaned out of all your liquid assets except for maybe a reasonable emergency fund. What if three weeks later, a fire started in your kitchen, and your entire home burnt to the ground? Now you’re out $100,000, and you have no cash with which to buy another house. Yikes!

So homeowners insurance is there so that you can be sure that this doesn’t happen to you. You have a lot of money in your home, and paying a tiny fraction of your home’s worth to the insurance company each year helps you make sure you won’t lose that investment any time soon.

It’s Probably Financed

Now, if you’re like most people, you probably financed at least some of that $100,000 home. So let’s say that you had a great down payment of $30,000, and you took out a mortgage for the remaining $70,000. Now, if you don’t have homeowners insurance and your home burns to the ground in a month, you’ll not only be out $30,000, but you’ll also owe your financing company $70,000. You don’t have this money in your bank account, and now the bank doesn’t have any way to make sure that they get their investment back.

So, chances are likely that if you’ve financed more than a few thousand dollars of your home, your financing company will make you insure the home as part of your financing contract. This protects not only you but also the financing company from losing a lot of money if something happens to your home.

Hopefully these two reasons are enough for you, but keep in mind that even after your home is completely paid for and you technically have enough money in the bank to buy a new home, homeowners insurance will still keep you from losing a lot of money. After all, keeping your home around and in good shape is not only convenient but it also saves you money in the long run.

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