What is the Function of Home Owner’s Insurance?

What is the Functions of Home Owner’s Insurance?   Homeowner’s insurance is a standard requirement from lender’s when purchasing a home.  Basically, home insurance protects the value of your property investment, but also has a few specific functions:

Lender’s Perspective   Homeowners insurance is a requirement for a loan from your lender.  This is a protection for the lender from the risks of financing your purchase.  The lender requires that you carry coverage that repairs or replaces the home if it is damaged or destroyed.  The home is collateral for the loan, and without it, the lender loses its leverage to make you repay.

Repair or Replacement   Just like car insurance for damages to your vehicle, home insurance pays for damage to your home.  If a natural disaster hits and tears up your roof, your insurance benefits typically cover the costs of damages.  This is a major function of homeowner’s insurance.  If your house is totally destroyed, this part of your homeowner’s insurance policy covers the cost to rebuild your home.

Liability   The liability portion of homeowners insurance is vital.  This part of your coverage pays for legal and medical costs and lawsuit judgments against you when someone is injured or dies on your property.  This is even more critical if your property has a pool or other feature that increases risks of accidents.

Valuables   Another portion of homeowners insurance is protecting your valuables and possessions in the home.  This feature covers you against theft or vandalism.

Make sure you shop around for good homeowner’s insurance.  Ask friends and family members who they recommend and what type of coverage their policies have before picking a company.  Remember, your home is one of the biggest purchases you will make in your lifetime and you want it well protected.

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