When it comes to homeowners insurance, you may not have a choice in whether or not you’ll need to buy it. If you own less than 20% equity in your home, your lender most likely will require homeowners insurance (sometimes called “hazard insurance”) to protect their investment with you. As a rule of thumb, you should have enough homeowners insurance to cover a complete rebuild of your house, replace all of your belongings, and cover all of your combined assets.
There are no state-mandated requirements for homeowners coverage (as there are for auto insurance in most states), and a mortgage lender may require you to insure for only 80 percent of the replacement value of your home. But being underinsured could leave you on the hook for a significant sum, especially if you ever need to completely rebuild.
Read AMS’s article in the AAFMAA Learning Hub to see what’s covered by homeowners insurance, what’s not covered, and what you need to know if you’re shopping around for it.