Home Insurance FAQ
- Q.What Does Homeowners Insurance Cover?
- Q.Is Homeowners Insurance Required?
- Q.Is Homeowners Insurance Tax Deductible?
- Q.Is Homeowners Insurance Included in the Mortgage Payment?
Homeowners insurance provides coverage for a range of risks that you may face as a homeowner that otherwise can be financially challenging to cover out of pocket. These include:
- Property damage: This includes damage and destruction to your residence and/or detached structures. You will receive compensation, up to the limits of your policy, if your house or storage shed is damaged due to a covered hazard. Standard covered circumstances include things like hurricanes and vandalism, but other hazards such as earthquakes and floods are excluded. Be sure to check your homeowners policy for exclusions.
- Personal property loss: Includes damage or theft of personal property, up to your set policy limits for covered circumstances, which typically excludes flooding, earthquakes, and personal negligence. If your personal property is very valuable (such as collectibles or antiques) you’ll likely need additional “riders” or special endorsements on your policy. Be sure to talk with a knowledgeable agent about your personal belongings and valuables, as standard limits may not be adequate to cover a major loss.
- Personal liability: If you, your family member, or even your pet causes an accident, injury or property damage, your homeowners insurance can protect you. Whether the issue requires medical care or repair of property, you will typically have coverage up to your liability limits. There are exclusions, such as aggressive acts against a neighbor, so it is important to fully understand your liability coverage. Be sure to talk with an agent about how to choose adequate policy limits that protect your finances in the event of a lawsuit.
- Added living costs: If your house is uninhabitable, your homeowners insurance can pay for alternative living arrangements while your home is repaired or rebuilt. Depending upon your homeowners insurance company and the specifics of your policy, this may be included or may be an optional coverage. You will typically have daily and total overall limits for this coverage.
Your state may or may not require homeowners insurance, but your mortgage lender typically will require coverage in order to provide a home loan. Even if you own your home outright and you are not required to buy homeowners insurance, it’s still a good idea to protect your investment with an insurance policy. That way you can get the financial compensation you need to repair or rebuild after a loss. Not only that, but your home coverage can help to protect you financially in the event of a liability claim that leads to a lawsuit.
Your insurance premiums are not tax deductible except under special circumstances. You do receive other tax benefits as a homeowner, but they are not related to homeowners insurance.
If you’re a landlord or a homeowner who uses part of your home for business purposes, you may be able to deduct a portion of your homeowners insurance. A tax advisor is your best resource in determining what you can and cannot deduct on your taxes.
Homeowners insurance is not included in your mortgage payment, unless it is escrowed. Today, creating an escrow account that covers your mortgage payments, your home insurance and even your property taxes is common practice.
Additionally, your mortgage insurance is typically included in your mortgage payment. This is paid if your loan exceeds 80 percent of your home’s value. Mortgage insurance does not insure your home. It insures the bank if you default on your loan.