Do I Need Homeowners Insurance For A Townhouse?

Homeowners insurance is as important to someone living in a townhouse as it is to any other homeowner and, if you have a mortgage, your mortgage lender will require that you maintain a policy to cover their financial exposure. If you fail to maintain the proper level of homeowners insurance on your dwelling the company holding your mortgage is within their rights to mitigate the risk of losing their financial investment by taking out insurance for you and having you charged for it.

There are several negatives to this process, called force-placed insurance, including:

• The coverage with force-placed insurance will have fewer benefits than regular homeowners insurance and may not pay any benefits to you for loss of your personal property. It may only cover the dwelling itself, protecting only your mortgage lender's interests.
• Force-placed insurance will usually cost more than the homeowners insurance you could buy for yourself. Plus, your mortgage lender's transfer of the cost will increase your monthly mortgage payment.
• By letting your insurance lapse you will have created a black mark on your insurance history, labeling you as an undesirable insurance risk for any future insurance you try to obtain. This will make your future insurance purchases more expensive because of your higher risk.

A Townhouse is a House

Even though your townhouse may be located in a community where the homeowner's association (HOA) maintains a master policy that may cover common areas such as the swimming pool and the recreation center, that policy wouldn't pay for your loss if, say, you had a fire that destroyed your property. Homeowners insurance is meant to pay for losses suffered as a result of any covered peril such as fire, burglary, windstorm and vandalism, to name a few. It covers not only the structure itself but also the appliances, electronics, clothing, jewelry, artwork and other personal possessions found within the structure. It also adds liability coverage in the event that someone visiting you gets injured and sues you in court or incurs medical expenses.

It should be noted that, just as in any homeowners insurance policy, there may be clearly defined limitations on the amount that will be paid on claims for the loss of expensive items such as furs, jewelry, artwork and other high-priced collections such as coins or stamps. These items may be covered fully, but it would require a special endorsement.

Does Renters Insurance Cover Power Surges?

While it's estimated that, in North Carolina, 95% of homeowners carry homeowners insurance, only about 40% of renters have renters insurance. Those who do carry renters insurance have taken an important step toward helping guard their financial futures, and not only for the replacement cost of their personal property in the event of a fire or a burglary but also in case someone gets injured at their place and they're held liable.

Understanding Your Renters Insurance Coverage

Renters insurance is extremely affordable compared to homeowners coverage, at a comparative cost of only about 15%. According to Insurance Information Institute data from 2013, North Carolina has some of the most reasonable renters insurance rates in the country, running about $146/year at that time, one of the cheapest in the country. The reason renters insurance is so much less expensive than homeowners coverage is because the property it protects is strictly personal. If structural damage or loss is suffered in your rental home, it's the landlord's insurance policy that covers the claim.

Coverage For Power Surges

Power surges occur when the electricity going to your home is suddenly interrupted, even for just a few seconds, and then suddenly comes back on again. Electronic equipment and electrical appliances are designed to run at a certain voltage, usually 120 volts. Voltage, however, is not constant, but runs within a range between zero volts and 169 volts (peak power). When the power is disrupted and then suddenly comes back on it can send a power surge down the electric lines far in excess of the maximum 169 volts your electrical equipment is designed to handle. This spike can be fatal to your electronics, causing an arc that can overheat electrical components. Even small surges can eventually play havoc with your television, computers and stereo system, which is why experts recommend hooking this equipment up to surge protectors.

Your insurance company expects you to protect your electrical devices from harm by unplugging them in the event of a power outage and not plugging them in until power has been restored. Power surges that damage your equipment will typically not be covered by your insurance unless they result from a peril covered by your policy such as a fire or a windstorm. You may, however, be able to get an endorsement to your policy that will specifically cover any power surge. Speak to your agent for guidance.