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Do you need homeowners insurance?

Homeowners insurance is the kind of thing you hope you never have to use, but if you need it, it's invaluable. Whether it pays for natural disasters, such as flooding or lightning damage, or man-made problems, such as fire, vandalism or theft, homeowners insurance can get you back on your feet and give you back a normal life after your house or possessions are damaged or lost.

Before anything happens to your house, it's a good idea to videotape your possessions so that, in case of catastrophe, you'll already have records of what you own, which will simplify the process of filing your claim. Also, it's worth reading through your policy, as there could be expenses that you may not realize you could get back money for, such as hiring a company to remove mold. Check what your policy covers and what it excludes.

Although you aren't legally required to have homeowners insurance, if you want to borrow money from a mortgage bank, your lender will probably insist on it. In addition, if you own a condominium or a co-op, the tenants' association might require you to have insurance coverage, since if something happens to your condo it could affect everyone else's.

Even if you maintain your house and you're not in the path of natural disasters like hurricanes or tornados, homeowners insurance comes in handy for unexpected scenarios. For example, if you throw a goodbye party for a friend and a guest trips inside your property and hurts himself, he could hold the owner of the property (you) responsible. Homeowners insurance should pay for the injured party's medical expenses and protect you against legal problems.