Why do I need homeowner's insurance?

Homeowner’s insurance provides a safety net to protect what is likely to be your biggest investment – your home – in the event of property damage, theft and even liability. Without homeowner’s insurance, many people would be unable to afford expensive repairs and could even lose their homes.

Just think about what kind of position you would be in if these scenarios occurred, and you did not have homeowner’s insurance to protect you:

• Lightning hit your house and sparked a fire that destroyed half the structure and most of your belongings. 
• A hurricane or severe thunderstorm tore through your neighborhood and ripped your roof off, destroyed your outbuildings and brought a tree down on your house. 
• Someone broke into your house and stole or damaged thousands of dollars worth of electronic equipment and other valuables. 
• Someone sued you for hundreds of thousands of dollars after injuring themselves on your property.

About 95 percent of homes are protected by homeowner’s insurance, according to a 2003 study by the Insurance Research Council. The Insurance Information Institute (www.iii.org) suggests that you need enough insurance to cover the cost of rebuilding your home at today’s prices, and to meet today’s building codes.

Most homeowner’s insurance policies also cover damage or loss of the contents of your home. But, as with the structure, you need to consider whether you want your coverage to cover the cost of replacing the items, or to reimburse you for their actual value. Replacement-cost homeowner’s insurance costs more, but provides better protection.

Finally, most lenders require you to carry homeowner’s insurance to cover the cost of the mortgage. You can cancel your policy once your mortgage is paid off, but think twice before you do so: homeowner’s insurance really does protect your investment.