Homeowners insurance isn’t the same as mortgage insurance, which you may have to buy if you put less than 20% down on your home loan. (FHA and other federal loans may also require mortgage insurance, regardless of your down payment amount.) If you default on your loan, mortgage insurance will help reimburse your lender.
Homeowners’ insurance coverage isn’t required by law, but if you have a mortgage, your lender will likely require you to insure the home to protect its investment. Even if you don’t have a mortgage, home insurance is almost always a wise purchase. Because it gives you property and liability coverage, a homeowners policy is a financial safety net you may someday be glad to have.
Just like it sounds, other structures coverage provides insurance for any structures on your property that aren’t attached to your house. That could include a shed, fence, or detached garage. A delivery person slips on your icy sidewalk before you get around to salting it. He breaks his wrist in the fall and sues you for medical bills and lost wages. Your liability coverage could pay your legal fees, plus any damages you’re responsible for in the lawsuit, up to your policy limit.
It’s important to keep in mind that coverages come with limits — the maximum amount your insurance policy will pay toward a covered claim. When selecting your coverage limits, be sure to consider things like the potential cost of rebuilding your home or replacing your belongings. That way, you can be better prepared if your home or belongings are damaged or destroyed by a fire or other covered peril.