Many homeowners may be surprised to find out that home insurance isn’t generally required by any state or federal law in the U.S. There are no fees or other legal repercussions for not carrying insurance on your home. This doesn’t mean you won’t need home insurance, however.

When Home Insurance is Required

In general, you will be required to carry home insurance when you have a mortgage. As long as you have a mortgage on your home, the bank may require you to carry home insurance. Banks usually require you to carry enough home insurance to cover the mortgage of your home. This amount obviously varies depending on the value of your home.

What Kind of Insurance is Required?

In general, a basic required home insurance policy includes four areas of coverage:

• Dwelling Coverage: Dwelling coverage provides compensation for damages to the physical home and its attached structures caused by fire, wind, hail, lightning, smoke, theft, vandalism and other incidents.
• Personal Belongings Coverage: Personal belongings coverage provides compensation for loss of or damage to your personal items such as clothing, furniture, electronics and more.
• Liability: Liability insurance covers bodily injury and property damage someone else may suffer on your home’s property.
• Additional Living Expenses: Additional living expenses (ALE) provide compensation for living expenses if the home is rendered uninhabitable by a disaster.

If you live under a homeowners association (HOA), you may also find a home insurance requirement.

Why is Home Insurance Important?

Whether you have paid off your home’s mortgage or not, home insurance is crucial for protecting where you live and everything you own. Without the proper home insurance coverage, you could face thousands or even millions of dollars in repairs, rebuilding, medical bills and legal expenses.

Many homeowners end up with a home insurance policy not suited for their home. In general, it is recommended that you carry enough insurance to cover the total replacement cost value of your home. Keep in mind that this is not the same amount as your home’s market value or mortgage. Instead, it is a combination of how much it would cost to completely rebuild the home after a disaster, including building and labor costs.

Be sure to speak with your insurance agent and bank to make sure you cover your home with the appropriate amount of home insurance for you, your belongings and your family.

Also Read: Does Home Insurance Cover Wind Damage and Hail Damage?

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