Homeowners' insurance is an insurance policy that covers unforseen damage to a property from various catastrophies (including fire, theft, etc.) as well as liability coverage for personal damage or injury that takes place on the property. Lenders require buyers to obtain (and often pre-pay in an escrow account) homeowners' insurance, but even buyers who are not obtaining financing see it as a smart investment to protect their assets.
Buyers should always investigate what their homeowners' insurance policy does not cover. Often, things like flood damage and other 'known' risks in a particular area are not covered and insurance for these risks can be obtained through an addition to their homeowners' insurance policy or a separate policy altogether.
This document is a community edited guide, is not legal advice, and is subject to changes, modifications, and may contain inaccuracies or out-of-date information. As with any important financial transaction, consult a real estate professional and/or an attorney. See our terms of service for more information.