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Who Needs Homeowner Insurance?

February 21, 2024

FHA Loans

FHA loans, VA mortgages, and similar government-backed home loans don’t force the borrower to select specific types of homeowner insurance to protect your investment but that does not mean it’s not necessary.

Mortgage insurance protects the lender. If the borrower defaults on the FHA home loan, mortgage insurance minimizes the loss for the bank. Home insurance, on the other hand, is a tool for the borrower. It protects your investment by insuring your home and its contents depending on the wording of your specific policy. 

First And Foremost

Paying for both insurance types may make you feel there is protection for all circumstances. But not all types of damage are covered by your insurer.

Did you know that flood insurance is completely separate from insurance for water damage? Some borrowers do not. At first. Some learn the hard way.

If you have flood damage but no flood insurance coverage (“rising water”) the insurer will likely not reimburse you.

Do you have protection against water damage from a broken pipe? That scenario may be spelled out in your policy. Check to make sure because if the policy does not specifically mention flood-type damage such as rising water, you are NOT covered.

Some may think they are fully protected under FEMA flood insurance, but FEMA’s coverage may not extend to issues like personal property in the basement of a flooded property. Read the fine print for all policies before you commit to a specific type.

Important Issues To Remember About Home Insurance

Like most other forms of commercially provided insurance, you may have to agree to some form of a deductible. Setting your deductibles is easy if you remember that you must have the cash to pay them at any time, if you need to do so. 

Don’t agree to an insurance deductible higher than you can afford to pay. Can you pay that deductible out of pocket right now? If not, your deductible may be too high.

Ask Your Insurer What They Expect

Ask about the insurer’s policies covering fire, flood, and other natural disasters. Will the insurer require a separate policy for issues not mentioned specifically under the policy as currently written?

Ask the insurer to explain under what circumstances you are covered for and when…plus which may demand an addition to your current insurance policy.

Which Coverage Is Right For You?

One type of homeowner insurance may protect you against damage to the physical structure of the house. Another type of coverage may protect against the loss of personal property, and you may also be offered liability insurance to protect you from legal liability where applicable.

Be sure to check the rules of your state, lender requirements, and other variables that could factor into your transaction in this area.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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About FHANewsBlog.com
FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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