Homeowner's Academy

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Do You Have to Have Homeowners Insurance?

by Guylaine Cadorette | Feb 17, 2021
Picture of a white bench and bright pink flowers on the front porch of a bright blue house.

You don't have to have homeowners insurance. With increasing monthly premiums, forgoing a home insurance policy may seem like a simple way to reduce the overall costs of homeownership. And if you're able to pay for your home upfront in cash or have completely paid off your mortgage, you can avoid purchasing homeowners insurance altogether.

Though not required, you may still want to take the time to find the right home insurance policy for your needs. Your house is likely your most valuable asset, and homeowners insurance will help you protect it. Before you commit to going without it, here's what you need to know about the potential consequences of not having home insurance:

Is It Illegal to Not Have Home Insurance?

You can legally own a home without obtaining homeowners insurance. Unlike car insurance, which is a legal requirement in most states, there are no state or federal laws that require you to insure your home. That being said, you may still have to obtain home insurance--not because of the government but because of your mortgage lender.

Your lender is, essentially, investing in your home with you, and they will want to protect their investment. When you're looking for a loan or refinancing your home, you may be asked to provide proof of homeowners insurance before getting approved for funds. Depending on where you live, your lender may ask you to purchase additional policies, such as flood insurance, as standard home insurance policies do not typically cover these events.

According to the Consumer Financial Protection Bureau, your mortgage lender is allowed to buy home insurance on your behalf and charge you for that cost. You may not like the policy they pick, though, as it could be more expensive or offer less coverage than what you would purchase yourself. This could easily drive up the cost of your monthly mortgage payments without giving your home the protection it needs.

What Happens If You Don't Have Home Insurance?

Not having home insurance is akin to gambling with your house. You're betting that nothing bad will happen to your property. Still, many things that can damage your house — like theft, vandalism, and natural disasters — are entirely out of your control. If you're incredibly lucky, nothing will happen. But if you aren't, you could face serious consequences, including:

  • Unable to make repairs: Natural disasters can cause significant damage to your home and property. You can do your best to prepare for some disasters, such as hurricanes, but others, like earthquakes and wildfires, can come swiftly and escalate with little warning. Homeowners insurance can help you pay for repairs, or in extreme instances, cover the cost of rebuilding or purchasing a new home. Without that protection, you could have to spend thousands, if not hundreds of thousands, to repair or rebuild your house.
  • Vulnerable to legal action: You can be held liable for any accidents that occur on your property. If a child gets hurt while playing in your yard, your dog bites someone, or a visitor slips on your slick walkway, the injured party could sue you. This leaves all of your assets, including your home, vulnerable. Most homeowners insurance policies offer some liability coverage to protect you should anything like this happen on your property.
  • Loss of valuables: Theft and burglary are the two most common property crimes in the United States. If a burglar breaks into your home, you may lose precious items that have either monetary or sentimental value. Depending on the extent of your home insurance coverage, you may be compensated for the loss of any expensive items. If the burglar damages your property during the break-in, your homeowners insurance may also cover the cost of any necessary repairs. Without home insurance, you have to pay for these expenses on your own.
  • Foreclosure: You could end up losing your home. If you haven't been paying your monthly insurance premiums or cancel your policy after getting approved for your loan, you may be asked to pay what you owe or buy a different policy. And if you can't or won't do either, then you've violated the terms of your loan. In this case, your lender has the legal right to put your loan in default or foreclose on your home.

None of these events are guaranteed to happen. You may experience one of these events and come out of it relatively unscathed. If something does happen, you could end up having to deal with the financial fallout for years to come. It will likely end up costing you far more than a homeowners insurance policy would.

Why You Need Home Insurance

Even if you aren't legally required to obtain homeowners insurance, at the end of the day, you still need it if you want to adequately protect your most valuable asset.

What's more, homeowners insurance offers protection to more than just your house, including:

Protect Your Belongings

Your home is more than just a house; it's where you keep your prized possessions and the things you need to live your daily life. If these items are stolen or damaged, it can be stressful and costly to replace them.

Luckily, your personal belongings are also covered by your home insurance policy. You may not be able to get your items back, but at the very least, you will have the funds to replace them. Like your bike or laptop, some valuable items are still protected under your home insurance policy when they are stolen or damaged outside of your house.

The extent of that coverage depends on your policy, but every little bit helps. Further, you may be able to get a discount on your contents coverage by installing security upgrades, such as cameras or an alarm system. As a bonus, these relatively simple upgrades may also increase the value of your home.

Protect Yourself

Home insurance protects you and other members of your household from potential litigation, as most policies have some amount of personal liability coverage. This coverage means that you are protected if you damage someone else's property, injure or harm someone, or are otherwise found to be legally responsible for an incident at your home. It may cover everything, but depending on your policy, it could help pay for medical bills, legal costs, repairs, or replacement items.

Protect Your Peace of Mind

Homeowners insurance can help protect your peace of mind. You can't avoid a natural disaster or prevent a robbery, but you can prepare to deal with these events if they do occur. By purchasing a comprehensive policy from a trusted insurance agency in your area, you will have the support and protection you need if the worst does happen. That peace of mind is well worth the cost of homeowners insurance.

Ultimately, homeowners insurance may not be legally required, but it's probably something you'll want to have to safeguard your home, your finances, and your family.

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