Why is home insurance called homeowners insurance?
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Home insurance is also referred as to as homeowners insurance since it is specifically available only to homeowners. There are several types of insurance to protect your property and residence and the best type for will depend on your living situation.What are different types of home insurance?
You may also hear the term hazard insurance. While home insurance and homeowners insurance are the same thing, hazard insurance is not. Hazard insurance is only a one part of home insurance, but it can also be purchased separately.
Another insurance policy offered to homeowners is called mortgage insurance. This is very different because it is designed to protect the mortgage not the house.
This does not mean if you do not own a home that you do not need insurance. You should decide if you need protection because one never knows when disaster may strike. There are insurance policies designed for renters and condo owners as well.
What is the difference between home insurance and hazard insurance?
Hazard insurance is designed to cover your home and personal property from damages. This would include damages from things like:
Home insurance is a combination of basic hazard insurance and liability insurance. Liability protects you from the cost of lawsuits or medical payments in the event someone is injured on your property.
While home insurance includes hazard insurance, you may also need to purchase additional hazard policies. If you live in a flood zone or near a fault line, basic hazard insurance may not be enough coverage. You should always check exclusions on your home insurance and if you feel you need additional coverage, you can purchase additional hazard policies.
How is mortgage insurance different from home insurance?
While home insurance, homeowners insurance, and hazard insurance are all designed to protect you from loss of your home and possessions, mortgage insurance is designed to protect the mortgage on your home.
Home insurance pays out to repair damages, replace items, and even compensate for living expenses due to being relocated during such times. Mortgage insurance is designed to protect a lender in the case of default.
A lender can require both you to carry both insurances. Most companies will require you have homeowners insurance regardless of risk or amount borrowed. They require it to protect your investment much in the same way car lenders require you have car insurance.
Some lenders may require mortgage insurance to protect their investment. It may be a requirement if you are deemed high risk. Things like past bankruptcies or foreclosures. They may also require it if you are unable to make a down payment.
While lenders may require you to purchase this insurance, they may also purchase it on your behalf. They would set up the policy and pay the premiums but may charge you a higher interest rate to offset the cost.
Unlike home insurance, when the loan is mature, you may be able to drop mortgage insurance. Lenders will require home insurance until the loan is completely paid off though. You will have to contact your lender to find out when you will be eligible to drop mortgage insurance if it was required.
What if I live in a condo?
Condominiums are usually many homes built on the same foundation. You would own your individual condo and land, but not the rest of the building. Because of multiple owners, the condo association would maintain insurance on the structure. The association will include this protection as part of your yearly or monthly dues.
This insurance would only cover the structure from damages so you will need to purchase a policy to cover your possessions. You will also want protection from liability if someone was to be injured on your property.
Insurance companies have created special bundle packages to cover this need. It is called condo insurance or condominium owners insurance. Like homeowners insurance, you may need additional coverage for floods or earthquakes.
Do I need insurance if I rent?
Whether you rent a house or an apartment, you may wonder who is responsible for damages. The owner of the structure will be responsible for the structure but they will not cover your possessions or liability.
Renters insurance such as condo insurance is designed to protect you and your possessions. As a renter, you may be at higher risk for vandalism and theft. In addition, if a fire starts in another apartment in your building it could spread to yours.
Many rental agencies are now requiring you have insurance and may offer you a policy through their insurance company. You are not required to use their company and you should make sure to get coverage that suits your personal needs.Previous PostHow do I file a homeowners insurance claim?Next PostWill home insurance pay for a new floor?