When do i need to buy homeowners insurance

Here's an overview of what's typically included in a homeowners policy, as well as some other things to consider based on where you live and what you own.

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By having homeowners insurance, you and the lender are protected in the event that the house is damaged or destroyed. Additional coverage can also be added such as flood or earthquake insurance, depending on your situation. Replacement-cost policy — This type of policy covers the current cost to replace your home.

For example, if you were to buy an older home that has unique features, the cost to restore it may be higher. A replacement-cost policy runs about 10 percent more than a cash-value policy but will cover the cost of rebuilding.

Cash-value policy — This type of policy costs less than a replacement-cost policy and covers the market value cost of your home and its contents.

So rather than reimburse you the amount you paid for something, you will only get back its depreciated value amount. While some types of insurance may be optional, homeowners insurance is a must if you want to own a home.

Legally, you can own a home without homeowners insurance. However, in most cases, those who have a financial interest in your home—such as a mortgage or home equity loan holder—will require that it be insured. And, for your own ongoing financial protection, you'll want your home to have adequate homeowners coverage , as well.

Home buyers looking to finance their purchase will quickly learn what those who have a mortgage already know—your bank or mortgage company will most likely require you to get homeowners insurance coverage. In the unfortunate event your house burns down or is badly damaged by a hurricane , tornado or other disaster , homeowners insurance safeguards them as well as you against financial loss.