June 29, 2022
Insurance

Is Home Insurance Mandatory In USA?

Home insurance refers to the damage protection of a house from any natural or unnatural cause. It assures to cover all the financial losses of the insurance holder. A home insurance policy is an important thing to protect your house from any unexpected loss and thus is a must-have asset for everyone. Buying home loan insurance offers extra security, but it is not required.

Home insurance in the USA

In the USA, home loan insurance is more popular among citizens. It is the insurance of the loan taken over the house and protects the bank if the house is damaged. There should be a person mentioned in policy who has an insurable interest in the property. Sometimes they don’t need that person if the value of the property exceeds the amount of loan. In that case, the destruction did not affect the recovery of the loan’s full amount.

History of home insurance in the USA

In September 1950 first home insurance policy was introduced in the USA. Before 1950, there were separate policies for separate threats as fire losses, theft, etc. During 1950, the citizens are allowed to purchase all the insurance they need in one single policy. In 1971, an ISO (insurance services office) organization was formed to standardize and provide risk information.

Types of insurance

There are many types of home insurance available in various aspects. The major classification is based on the threats, and they are two types ‘named threat’ and ‘open threat.’ A named threat policy provides security or coverage for the damage by the threats listed in the policy. These threats can be chosen specifically as per need. Open threat policy provides coverage for damage caused by any threat.

Measure Causes of House Destruction

According to the report of fact book, there are numerous causes of home destruction; 16% of cases are due to fire and lightning, 30%. Due to wind and hail, 11% due to water damage and freezing, 2% for theft, and 4% for other causes. There may be a change in this data based on geographical location and natural conditions. Home insurance is a must to protect one’s house from these losses.

Pricing Of Insurance Premium

Pricing of house insurance depends on many factors, including location, coverage, amount of insurance, etc. If the house is located near a fire station, the danger of fire is low, So the premium for such policy is low. If it is located at a high-risk place, then the premium is high. If the coverage is large premium amount is also large, and the amount of insurance is low, the premium amount is also low. It also depends on some other factors like age and health of policyholder.

Conclusion

We cannot say that home insurance is mandatory by the government or any other law in the USA. But it is a must thing for everyone to secure their houses and their future from any undesired threat. Every individual must buy house insurance to secure their assets and liabilities.