If you are getting, or already have, a mortgage on your home, your lender requires that you have homeowners insurance. So, no home insurance = no home loan. This is only part of the answer to why is homeowners insurance important; it is not the most important reason.

Then why is homeowners insurance important?

Recently my son had a birthday. On his birthday he got a bunch of rescue bot action figures. Basically transformers for little kids. They are his most prized possession. He will not let any of his siblings play with them without permission, there is no playing with them outside on the sidewalk, and they have to stay in his room with him instead of downstairs with the rest of the toys. He is doing everything he can to keep them safe because to him they are irreplaceable.

Your house is very likely your largest asset, if not is very close to it. As such, protecting it should be one of your biggest priorities. You, like my son, are probably very concerned about something happening to it, because it is irreplaceable.  There are some things you can do like routine maintenance and setting house rules to keep the house from getting beat up.

But there are some things that could harm your home that you have no control over: things like weather, a broken pipe, or even other people. This is where homeowners insurance comes in. The purpose of having insurance is to transfer a risk. In this case, the risk of something happening to your beautiful home. If you are covered correctly and adequately,  your home insurance will step in to help you repair or replace all or most of the damage that you cannot prevent.

To help my son share and play nice with his toys I have assured him that if someone else breaks his rescue bot then I will get him a new one. He is a lot more comfortable letting others join in on his fun now that he knows he as an insurance policy to cover that, now that the risk is transferred to me.

So, what do you think? Is homeowners insurance one of those necessary evils, or perhaps it is a smart backup plan?