We all watched with horror as Hurricane Sandy tore into the East Coast, doing particular damage to the tri-state area of New York, New Jersey and Connecticut. One of the most important silver linings that we can all take away from this tragic event is to learn from it—to use it to remind ourselves of what we can do to make responsible preparations in our own lives for unforeseen or unavoidable catastrophes. In this instance, the storm’s devastation reminds us of the importance of homeowners insurance. Owning a home is a great privilege, something that many families and individuals have worked hard to accomplish. But, for all of the financial benefits of homeownership, damage or destruction to your home can turn the security of an asset into a costly liability in the blink of an eye. That’s where homeowners insurance comes into the picture.
If you own your home outright, you’re not required to carry homeowners insurance. That said, failing to safeguard your property and possessions with a homeowners policy could be a big mistake. For many of us, our home is our greatest asset, and it simply makes good financial sense to protect that asset. Take a cue from mortgage lenders, who do this kind of thing for a living. They require homeowners insurance and they write it into every contract, because they understand the ramifications if something goes wrong. Another way to think about it is to view your home—as many people already do—as a part of your retirement fund. A savvy investor only invests assets into the stock market that he or she can afford to lose, and it’s probably a good idea to treat your home the same way: if you can’t afford to lose it, then protect it!