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Do I Need Homeowners Insurance If I Own My Home?

The Basics of Homeowners Insurance
Written by
January 19, 2023
min read

Homeowners' insurance is not mandated by law. However, most lenders will require it as a mortgage condition. Home insurance will protect the creditor from the risks associated with a loan. Even if you are not in a situation where insurance is required, the protection offered against damage and lowering the risk may be beneficial.

What is Homeowners Insurance?

Homeowners insurance is a service that provides financial protection from damage to your house and property. It does this by reimbursing the value lost when property damage occurs, such as a fire. To do this, the homeowner pays a certain amount every month. Then, when misfortune strikes, the homeowner sends a claim to their insurer, which, depending on the policy, will reimburse either a part or all expenses of whatever has been lost.

Is Home Owner’s Insurance Required?

If you own the property, no, it is not! Unlike car insurance, if you wish too you can assume 100% fiscal responsibility for your dwelling. If you still have a mortgage, it is almost definite that you will need insurance. In the unfortunate scenario where a disaster happens to your home, most individuals would not be able to pay off their mortgage while also rebuilding the home, meaning that lenders require insurance in order to protect their investment. Typically, you will need to present proof of insurance before the closing.

What Kind of Homeowners Insurance Do I Need?

Although the various home insurance “Forms” are covered below, there are a few specifics that you will want to be sure are covered by the policy you choose.

  • Legal Coverage: If someone falls down your stairs, hits their head on something, or any other mishap, you may be liable for the medical bills and possible legal ramifications. You will want to ensure your policy covers the medical bills, court bills, and possible court awards.
  • Your Home: As you may have guessed, covering the actual home is the most essential attribute of home insurance. The policy should cover repairs to both the house and any detached buildings (sheds, etc…)
  • Your Possessions: Your policy should also cover personal belongings such as furniture, electronics, art, and almost everything else that you own.

Is Hazard Insurance the Same as Homeowners Insurance?

For all practical purposes, yes. Hazard insurance covers the structure of the home. It is a part of home insurance. If a lender has a clause about hazard insurance, that means that they require you to have home insurance.

What Does Homeowners Insurance Cover?

Homeowners insurance provides coverage for disaster, loss, injury, or other damage that occurs to the dwelling. Though it changes depending on the policy, the following are the most common hardships covered by this insurance: 

  • Fire
  • Vandalism
  • Theft
  • Flood
  • Smoke
  • Natural disasters (Hail, windstorms, lighting, etc...)

What Does Homeowners Insurance Not Cover?


  • Mold
  • Termites
  • Damage caused by birds or other wildlife
  • General wear and tear
  • Rust
  • Rot

Types of Homeowners Insurance

There are eight homeowners insurance options, although some are more common.

  • HO-1: Basic Form. This is the most limited insurance. It covers the belongings at their cash value and the home against ten named perils (fire or lightning, windstorm or hail, explosions, riots or civil unrest, aircraft, vehicles, smoke, vandalism, theft, and falling objects.). This form is seldom offered and consists of less than 2% of homeowners insurance policies.
  • HO-2: Broad Form. This policy is a massive upgrade from HO-1. It covers personal belongings and the dwelling at replacement cost. It includes all the perils from HO-1, but it also includes damage caused by ice or snow, involuntary overflow of water or steam, unintentional cracking, burning, or bulging of a built-in appliance, freezing, unexpected damage from an artificially generated electrical current, and volcanic eruption.
  • HO-3: Special Form. This is the most common insurance. This policy provides all-risk coverage. This means that all perils and damages to the dwelling will be covered at replacement costs, apart from the items that the policy lists as exclusions. HO-3 still covers personal belongings at cash value
  • HO-4: Contents Broad Form. Otherwise known as renters insurance, this policy covers liability and replacement costs for personal property. The belongings are still covered even if you are not the owner. This policy offers protection against the 16 named perils. However, it does not cover the building. Ensuring the structure is the responsibility of the landlord.
  • HO-5: Comprehensive Form. This policy offers the most coverage. It is similar to the HO-3, with the difference being that it covers personal belongings at replacement value and a higher coverage limit for expensive belongings like jewelry or electronics.
  • HO-6: Unit Owners Form. This policy is for folks living in a co-op. The policy varies depending on the insurance agent. It will be similar to one of the above-mentioned policies.
  • HO-7: Mobile Home Form.  HO-7 is the same as HO-3, except for mobile homes, which insurance companies cannot cover with traditional insurance forms.
  • HO-8: Modified Coverage Form. This form is for houses that do not meet standard insurance requirements. This policy is for older, high-risk homes and, as such, has minimal coverage. It covers the ten named perils and offers the cash value of the house and personal belongings.

What Happens If I Don’t Have Homeowners Insurance?

If you do not have insurance and no disaster strikes, then you save money! So long as there is no damage to the home, no injuries occur on your property, and nothing happens to the outbuildings, then there will be no consequences. 

What If My Home Is Damaged, and I Don't Have Homeowners Insurance?

If you own the home, then it is up to you. If the damages are severe, you will likely have to repair them out-of-pocket or sell off the property to someone willing to fix or demolish it. If the damage is minor to moderate, you can decide whether to repair it. Your HOA may have requirements for the upkeep of the property, so check with them.

If you do not own the home, It is up to the lender. If you have a mortgage but not homeowner’s insurance, they will demand fixing severe damage. If you do not have the cash for this, you will likely default on the loan.

Is Homeowners Insurance Worth It?

For most people, the security gained from insuring a home outweighs the cost. Not insuring your home is high-risk with minimal payout, especially in case of disaster.

How to Get Homeowners Insurance?

Homeowners insurance is vital to protect your investment against the risks of homeownership. It is worthwhile to get insured, even if it is not required. Policygenius has a helpful six-step guide to start the process.

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