Home Ownership Costs: Homeowners Insurance
Other necessary costs of ownership consume a quarter to half the amount borrowers could potentially put toward loan payments.
Repost from OC Housing News 2011-2016
Homeowners insurance protects the property owner against loss. It’s nearly always required by lenders because they want to protect the value of their collateral if they should need to foreclose on the property. Even if a lender doesn’t require it, the risk of catastrophic loss makes such insurance a necessity even for those who pay cash. Who would want to lose half a million dollars or more in a fire?
A standard policy insures the structure and documented personal property within. In addition, the package policy covers liability and legal responsibility for property damage caused outside the home itself by the owners, the members of the owner’s family, and even the family pets. Disaster damage is included, but this carries some exceptions, most notable here in California is earthquake damage, but damage due to floods and poor maintenance are also excluded. Separate policies can be purchased to cover earthquake and flood damage, but these policies can be quite costly.