Homeowner’s Insurance: Do I need it?

Homeowner’s insurance will protect your house in case of damages to the property or to household items.

If you are financing your home, your lender will require that you carry homeowner insurance, with a clause that the lender will be on the policy as ‘loss payee’. For example, if there is a fire on the property, the lender will collect first their part to satisfy the mortgage, before you get any proceeds. Or, the money could be used to rebuild the house.

Now if the damage occurred to household items, and you are current on your mortgage, the proceeds of that claim will most likely go back to you.

Keep in mind the insurance deductible. Sometimes if may not be worth it to run a claim through your insurance company. For example, you have a claim of $1,200, you will have to pay your deductible, plus it will go against your record of claims – may increase your policy or even hurt your possibilities of getting a competitive rate in the future.

If you do not have a mortgage on your property, it would be good to still consider having a homeowners insurance policy. Your home is potentially the biggest asset you will ever have, would you have enough money to replace it if something happens to it?

Be aware that there are exceptions to what is covered and those are referred to as ‘Acts of God’ such as earthquakes and floods. There are special policies to cover these. Check if the area where you live is in an area where these events may occur and make an informed decision.

About the Author:
Picture of Homewise


Homewise helps create successful homeowners and strengthen neighborhoods in New Mexico. We do this through our comprehensive real estate and lending services designed to support working families and individuals. We are a nonprofit lender, also known as a Community Development Finance Institution (CDFI).

Need more information?

We are here for you.