If you are planning on becoming a homeowner in Milwaukee, Wisconsin, you are probably wondering about homeowners insurance. Having something insured in case of damage sounds like a good thing, but is paying for a homeowners insurance just another unnecessary expense?
Homeowners insurance provides you financial protection in case of a disaster or accident involving your property. In other words, it covers not only the damage that is done to the property, but also liability for any injuries or damages holders of the policy cause to other people. This covers even household pets! In the further text we will speak about standard insurance coverage and is it required if you want to purchase a house.
What Does Homeowners Insurance Cover?
Homeowners insurance covers most disasters, but there are some exceptions, such as earthquakes, flooding or bad maintenance. A standard homeowners insurance policy has four essential coverage types.
1. Coverage for the Home’s Structure
If your house is damaged or even completely destroyed by fire, hail, hurricane, lightning or other similar natural disaster, the insurance will cover the expenses. Disasters that are not covered are flood and earthquakes. If you want to be insured in case of flooding, you have to purchase the National Flood Insurance Program, and for the earthquake damage insurance you have to find a separate policy. The standard insurance will cover most structures that are not directly attached to a house, such as a garage or a tool shed.
2. Personal Belongings Coverage
Most insurance companies provide coverage for up to 70% of the amount of insurance on the home’s structure. In other words – unless you have decided to purchase an off-premise coverage – your personal belongings are covered anywhere in the world. This includes furniture, clothes and other similar items. Keep in mind that although you can cover expensive things such as technology items or jewelry, there are usually dollar limits, so if they end up being stolen you most likely won’t be repaid the full amount – but you can always purchase some special property endorsements and insure the item for its appraised worth.
This also includes trees, plants and scrubs in case of fire, theft, explosion, vandalism, riot, even a falling aircraft! However, the standard insurance policy doesn’t cover damage done by disease or wind.
3. Liability Protection
Liability coverage means that you are protected against lawsuits for injury of body or property that policyholders or family members cause to other people. It also covers any damage done by pets. In other words, the insurance will cover the costs of defending the policyholder on court in case of a lawsuit and also cover the costs of any court awards – up to the policy’s limit. Just like the coverage of personal belongings, this coverage extends worldwide. The usual liability limit is around $100,000, but it can be higher. There are even insurances that provide broader services, such as protection in case of claims for slander.
4. Additional expenses
The homeowners insurance also pays the additional costs in case you have to live someplace outside of your property if it’s badly damaged by fire, storm or other disaster that is covered by the policy. Expenses that are covered are hotel bills, meal prices and most other living expenses. The exact broadness of coverage depends on the insurance company.
Types of Homeowners Insurance Policies
Despite every state having fairly standard policies, some might differ slightly depending on the area you live in. However, there are some most popular policies all around the US. For example, there is the HO-3 insurance policy, which has the broadest coverage. If you have renters living in your property, this is probably the best insurance you can get. There is the HO-2 policy, which is similar to HO-3 but offers more limited coverage and HO-4, specifically designed for real estate investors who plan on renting their homes.
Can You Own a Home without a Homeowners Insurance?
Legally, yes you can. However we wouldn’t recommend you doing so, as you might not even be able to purchase a home without an insurance. And why would you even want to risk sustaining financial damage? Natural disasters can occur at any given time. They are unpredictable and you never know when they might hit. Even if you live in an area where disasters aren’t norm, something can always cause the damage on your property, such as broken electric installations. You might even fall a victim of a theft! It’s better to be safe than sorry.
Also, if you are planning on purchasing a property, keep this in mind: Most banks and mortgage companies won’t even discuss lending you money for your purchase before you get the homeowners insurance. Lenders need to protect their investment. If any damage is done to your property before you’ve paid your mortgage, the bank will be in trouble as well. You purchasing the insurance policy also secures the bank.
Not only that, but if you want to purchase a home in the area that is known to experience regular floods, you will have to buy flood insurance. Same goes for the earthquake-prone areas.
Similar goes if you plan on buying condominium. You will be purchasing a financial stake in one larger entity, which means that your condo board will most likely require you to purchase a insurance policy. If something happens to your flat, it might damage the entire complex. This is why they think it’s rather important that every single unit is insured.
Of course, once your mortgage is paid off, no one will require you to purchase insurance. But the real question is why would you risk sustaining damage if you can prevent it, at least from a financial stand point? It’s advisable to always think about the worst case scenario and protect yourself from it.