One of the biggest risks of owning a property outright is that all repairs are financially your responsibility. While you can often turn to a landlord for help in the case of a rented property, things are different when you’re a homeowner.
If you are facing a home catastrophe, such as major property damage or even the destruction of your home, figuring out how to remain financially stable can be challenging.
However, with the right steps, you can mitigate your financial risk. Additionally, you can take steps following damage to your home to reduce the potential damage to your bank account.
Wondering what these steps are? You’re in the right place – here is how to maintain financial stability in case of a home catastrophe.
Make Sure You Have Homeowners Insurance
Homeowners insurance protects you financially in case of damage to your home and belongings while also helping to pay for financial claims if someone else is injured on your property. While it is not legally required, mortgage lenders will usually require homeowners to have this policy. While the premium for your homeowner’s insurance does add an additional cost to your monthly (or yearly) budget, it is well worth it as a protective measure.
Homeowners’ insurance costs an average of about $1400 per year. While this may seem like a lot, it provides you with protection in case of significant property damage, including damage caused by a variety of natural catastrophes. Disasters such as:
- Fire and smoke
- Hail and powerful windstorms
- Tornados and hurricanes
- Volcanic eruption
It also protects you in case of catastrophic property loss due to other situations, such as an explosion, riots, power surges, and more. Homeowners insurance can also pay for you to live in a rental property while your home is being repaired. So, while a cost of about $1400 a year may seem like a lot, if you’re in a situation where you need to submit a claim in the case of a home catastrophe, it can save you from financial ruin.
Consider Getting a Home Warranty
Homeowners insurance is not the only insurance coverage you should have to cover your finances in case of emergency damage to your home. A home warranty is a type of insurance that covers the appliances and systems in your home, including the electrical and HVAC systems. Home warranty coverage means that in case of major damage to the appliances and systems covered in your contract, repair and replacement will cost you a minimal amount.
While it may not seem like home warranty coverage is as important as homeowners insurance, this isn’t the case. Appliances can stop working out of the blue, and you may be caught off guard by repair and/or replacement costs. Additionally, larger systems such as your HVAC can cost you several thousand dollars to repair, which can damage your financial situation if you don’t have a home warranty.
With both homeowners insurance and home warranty coverage, you can mitigate the cost of home repairs in the case of catastrophe as much as possible.
Consider Government Aid
If you face a home catastrophe and do not have either of the coverages mentioned above, or you need additional financial help, consider checking to see if you qualify for governmental aid. There are several programs you can look at depending on your property, your income, and your age, so you should consider asking your local housing department for help.
Additionally, the financial aid available to you can be influenced by the type of catastrophe that affected your home. For example, the Federal Emergency Management Agency (FEMA) has an Individual and Households Program that provides financial help if your home was damaged due to a natural disaster. They also offer help with finding you temporary housing while your home is repaired.
It’s always best to have an idea of what government aid is available ahead of time, so you won’t have to worry about research in the case of an actual catastrophe.
While damage to your home can harm your financial stability, preparing for the worst-case scenario can help reduce the risk of this happening significantly. Additionally, there are avenues to reduce your financial liability even if you don’t have insurance, such as checking for governmental aid.