Finances (US)

Learn more about home insurance: is it worth it?

All you need to know about home insurance and its advantages are here. Check out the differences between home insurance, mortgage insurance, and warranty.

Home insurance: protection of your property and belongings

Protect your home and your family with home insurance. Source: Freepik.
Protect your home and your family with home insurance. Source: Freepik.

If you have a property, you must have worked a lot to buy it. Also, you must have worked to buy the stuff you have inside your property. Therefore, it is always good to think about protecting it with home insurance.

In the same way, you protect your car after buying it to avoid losses in case of damage or theft; it is recommended that you consider insurance for your house after purchasing it.

Although you are not obligated to do it, it is always a reasonable thing to think about.

However, you must know everything before applying for home insurance.

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Furthermore, home insurance is not the same as warranty and mortgage insurance. Therefore, keep reading to find out all about it!

What is Home Insurance?

Home insurance is coverage that protects you from accidents or unexpected situations that happen to your house and yourself.

Usually, the standard policy includes theft, wind damage, and fire. However, there are other types that may include a comprehensive list of risks.

Also, it does not only covers your house in protection but may include your belongings and even you and your family in case of liability protection and injury.

Usually, there are three traditional types of coverage with different prices.  Although you are not required to have one, it is definitely worth considering.

In addition, it is worth mentioning that if you apply for a mortgage, it is likely that your lender requires you to sign home insurance first.

How does Home Insurance work?

Home insurance offers protection for your house. Source: Freepik.
Home insurance offers protection for your house. Source: Freepik.

Home insurance works as any other type of insurance. It offers protection for your property and can include belonging and even yourself and your family.

In general, this insurance covers accidents and unexpected situations, such as fire, wind damage, and theft.

However, it can include much more. It depends on the policy you sign for.

Usually there are three types of insurance, as described below:

  • Basic policy: it is the simplest coverage you can get. It is also the cheapest. In addition, it is suitable for those that want seasonal protection. Therefore, you can rely on it if you have a cottage, for example. In summary, this type only includes basic coverage, like fire or wind damage. 
  • Broad policy: it is more comprehensive than the basic coverage. Usually, this type of insurance covers fire, theft, wind damage, and other emergencies, including the building itself.
  • Comprehensive policy: it is the highest tier of coverage. Usually, it covers all items and belongings, and it can include liability protection and injury. In general, it is more expensive. On the other hand, it might be worth it if you consider mitigating risks.

Basically, home insurance policies vary widely. So, it is hard to measure prices and coverage details. You must search for different types of insurance companies to determine which fits your needs better.

For example, some policies include earthquakes and damage due to water from storms. If you don’t live in a place where earthquakes happen, you don’t need to consider signing for a policy that covers it.

Furthermore, it is essential to keep in mind the price of covering your property. The prices not only include the items covered but also include many other factors, even your home location.

Getting a quote before deciding on home insurance is crucial.

Advantages

  • Home insurance protects your home against many unexpected situations and accidents;
  • Policies vary widely, so you can choose the one that better fits your needs;
  • Some policies include liability protection;
  • You can feel peace of mind knowing your property is covered.

Disadvantages

  • Usually, cheaper insurances offer less coverage;
  • In general, comprehensive coverage is expensive.

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Home Insurance vs. Warranty

See if you should get home insurance or a home warranty. Source: Freepik
See if you should get home insurance or a home warranty. Source: Freepik

Unlike home insurance, a home warranty applies for home systems repairs and replacements. It includes appliances like dryers, refrigerators, ovens, water heaters, and more. 

Warranties are contracts that last for a period of time, usually a year.

And it covers problems that occur because of poor maintenance or wear and tear on appliances and home systems.

In general, insurance doesn’t cover that, although you may find some comprehensive and expensive policies that may include that.

But if you have a warranty on your items, you don’t need to consider home insurance that covers what a warranty does.

Home Insurance vs. Mortgage Insurance

Home insurance also differs from mortgage insurance. Usually, mortgage insurance is required when a homebuyer or borrower makes a down payment of less than the regular 20% of a property cost.

Therefore, mortgage insurance is a protection for the lender, not the buyer or the property.

For example, if you want to go after an FHA loan, you need to keep in mind that it requires mortgage insurance.

Most banks also require that for the borrower who doesn’t meet all mortgage requirements. 

So, in summary, home insurance covers your property, while mortgage insurance protects the lender in case you fail on payments.

Recommendation: Mortgage Refinancing – is it worth it?

Speaking of failing on mortgage payments, you already have probably heard of refinancing your home loan.

Sometimes, it is not worth it. Other times, it can save you by lowering your rates and redefining terms and conditions.

Also, you can eliminate mortgage insurance when refinancing your current mortgage. This usually happens with Federal Housing Administration (FHA) loans.

To find out the advantages and disadvantages of applying for a mortgage refinance, follow our next post.

It explains to you what a mortgage refinance is, how it works, and the factors you must consider before signing up for a refinance option.

Also, we show you a reasonable option you can rely on in case you consider refinancing your mortgage. 

Check it out!

what is mortgage loan

How to apply for the Mortgage Refinancing

Mortgage Refinancing: is it worth it? Check out how it works and how you can get an amazing offer through Credible Personal Loan Marketplace.

About the author  /  Aline Augusto

My name is Aline Mesquita; I'm a writer here on the blog, where I write about finance in general and other subjects. I have been working with content creation for ten years. Also, I'm post-graduated in Project Management, with expertise in SEO practices. Currently, I am studying finance, market trends, and cryptocurrencies.

Reviewed by  /  Aline Barbosa

Senior Editor

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