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While homeowners insurance isn’t required by law, it is often required by your mortgage company. Most lenders require insurance to protect their investment in your home.

However, even if it isn’t required, it is necessary for your financial well-being. Damage to your home caused by accidents or disasters can cost you hundreds of thousands of dollars. If you can’t afford the costs, then you won’t be able to repair your home.

Not only is home insurance important to have, but it also important to make sure you have the right coverage.

Key Takeaways

  • Homeowners insurance is not required by law in any state.
  • If you have a mortgage, your lender likely requires that you maintain a certain amount of homeowners insurance.
  • Regardless of requirements, home insurance is vital to protect your investment.

Do you have to get homeowners insurance?

Unlike car insurance, which is required by state law, there is no law requiring home insurance. However, to satisfy the terms of your loan, your mortgage lender will most likely require you to carry a certain amount of home insurance. This is to protect the investment the lender has made in your home.

If you don’t have a mortgage, you may not be required to get homeowners insurance, but it is an enormous risk to go without coverage. If you do not have adequate coverage to protect your home and all of your belongings, you can risk financial devastation and losing the roof over your head.

What does homeowners insurance cover?

Home insurance covers multiple possible losses to you and your home:

How much homeowners insurance coverage do I need?

You need enough home insurance to repair or replace your home and personal property. Here’s an overview of how much coverage you need in each area.

Dwelling coverage

You need enough dwelling coverage to completely rebuild your home from the ground up if it’s completely destroyed. This is calculated based on all of the known details about your house: it’s square footage, construction materials, number of bedrooms and bathrooms and special features like fireplaces.

This needs to be updated annually to account for inflation and changes in construction costs. Consider adding an extended or guaranteed replacement cost endorsement to avoid being underinsured.

Other structures

Other structures coverage is usually set at 10% of the dwelling coverage. However, if you have a lot of expensive structures, like a pool, guest house or outdoor kitchen, you might want to raise this limit.

Personal property coverage

Home insurance usually includes 50% to 70% of your dwelling coverage as personal property coverage, but you can also buy additional protection.

If you have high-value items like jewelry or art, you may need to purchase special coverage to protect those items fully.

Liability coverage

Most standard home insurance includes $100,000 in liability coverage, but experts advise that you increase that up to at least $300,000 if possible.

While it is cheaper to purchase minimum coverage, it is important to consider what kind of expenses you would face if you experience a major loss. A slightly higher premium each month could make all the difference if the unthinkable happens.

How to save money on homeowners insurance

Buying a home is expensive, and adding on homeowners insurance can feel like another added expense. However, there are many ways that you can save money and get an affordable homeowners insurance policy:

  • Safety discounts: Many companies offer a discount when you have smoke alarms or a security system in your home.
  • Bundle discounts: If you bundle your home and auto insurance with the same provider, you could save extra savings on both.
  • Loyalty discounts: You could earn extra savings when you have a prior insurance policy with the same company or use the same provider as a family member.
  • Increase your deductible: One way to lower your monthly premium cost is to increase your deductible, although this means that you will have to pay more money out of pocket if you experience a loss.
  • Improve your credit score: While this is a long-term plan, improving your credit score can lead to lower insurance rates.
  • Avoid unnecessary claims: Claims increase insurance premiums, so avoid small claims that could be handled independently.
  • Decrease coverage limits: Speak with your insurance agent to ensure you are adequately covered if needed, but consider reducing coverage limits if you have more insurance than is actually needed.

Before you buy your policy, don’t forget to ask your insurance provider what home insurance discounts may apply to your policy.

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Lena Borrelli
Contributing Researcher


Lena Borrelli is a freelance writer from sunny Tampa Bay who has worked with such leading industry titans as Gronk Fitness, Morgan Stanley, Wells Fargo and Simon Corporation. Her work has most recently been published on sites like TIME, Microsoft News, Bankrate, Investopedia, Fiscal Tiger, The Simple Dollar, ADT and Home Advisor.