When trimming your budget, shopping for lower-cost homeowners insurance can save you money. You and your partner may even discuss doing away with it altogether, what the insurance industry calls “going bare.” If you are independently wealthy and can replace your home, your possessions and pay any claims against you without it making a difference in your life, then you might not need homeowners insurance. For the rest of the population, going bare is not a good idea.
If you have a mortgage, your lender probably requires you to have homeowners insurance. If you let your policy lapse, you could go into mortgage default. That puts you in danger of losing your home.
Homeowners insurance covers the costs to repair or replace your house if it is damaged or destroyed. The price fluctuates based on current construction costs and improvements you made to your home, so revisit your coverage every year to make sure you have enough coverage.
If your home is damaged, you might need to live somewhere else while workers are repairing your house. Your insurance should cover hotel bills or rent and any other expenses related to staying away from home, such as meals.
The more assets and personal belongings you have in your home, the more insurance coverage you’ll want. Consider your furniture, computers and other electronic equipment, jewelry, clothes and artwork. A good rule of thumb on valuing your possessions is to figure around 50 percent of the amount of insurance you have on your house, according to Wells Fargo.
Homeowners insurance covers you against lawsuits for bodily injury or property damage caused to others because of your property. You could be responsible for paying someone else’s medical bills or covering the costs of a lawsuit. If you have a pool or entertain often, basic coverage may not suffice, according to the SmartMoney website. In that case, add an umbrella insurance policy to augment your homeowners policy.
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