Homeowners Insurance

Homeowner’s insurance protects you from the financial impact caused by damage to your home. In a sense you are insuring your home to protect the money you have in the bank.

Investopedia provides a nice explanation of the way homeowner’s insurance works.

When you obtain a mortgage, the lender requires homeowners insurance to protect their interests in the event of damages to the home – their collateral for the loan.

For example, in 2017 Ventura and Santa Barbara counties experienced the devastating Thomas Fire in which many homeowners saw their homes and possessions destroyed in a matter of minutes. These homeowners were able to obtain financial help for replacing their home, furniture and other possessions (contents) and living expenses while they figured out how to move forward after the loss of their home.

A word of caution about homeowners insurance:

Each year you should review your insurance policy with your insurance agent to make sure you are adequately insured for any loss. Costs of construction, furniture and other possessions increase every year and your insurance coverage should keep up with these increasing costs. In the Thomas Fire disaster, some people who lost their homes found themselves under-insured, meaning that the amount of insurance coverage they were paying for did not keep up with the increasing values of their homes. When this happens, the homeowner is responsible for paying for any expenses the amount of insurance does not cover. So, if it costs $500,000 to rebuild a home but the insurance policy covers up to $400,000, the other $100,000 comes from the homeowner.