6 Scary Scenarios that Make Homeowners Insurance Worth the Cost
Homeownership costs add up fast. Thinking of foregoing insurance to save money? Read 6 scenarios that can happen if you don’t have homeowners insurance.
There are a lot of costs associated with owning a home besides your mortgage premium. You have utilities, maintenance and repair costs, property taxes, homeowner’s insurance, and possibly an HOA (homeowners association) fee and/or private mortgage insurance. It’s not uncommon to look for ways to reduce your costs. You might ask yourself, “Do I really need homeowners insurance? What are the odds something bad could happen to my house? Is it okay to forgo it for a bit to save some funds?”
Or perhaps you own your home free and clear. Does homeowners insurance make sense now that the property is 100% rightfully yours? How not having insurance could affect you depends on your status as an owner (whether you’re still paying off your mortgage or not) and the issues that may arise, such as a break-in, natural disaster, or injury on your property.
Before you cancel your policy, let’s examine a few scenarios that could happen if you don’t have homeowners insurance. That way, you can make an informed decision about whether the monthly premium is worth it.
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Am I required to have homeowners insurance?
Good question! If you own your home outright (meaning you’ve paid off your mortgage completely), you aren’t legally required to have homeowners insurance. This fact often comes as a surprise to homeowners, as we tend to equate property insurance with car insurance. However, if your home is 100% yours, no insurance is required…but you’ll assume all risk for any disaster that happens to or on your property (more on that below).
If you have a mortgage, your lender will most likely require you to have homeowners insurance. Why? Without coverage, you’re at higher risk of defaulting on your loan if disaster strikes. Without homeowners insurance, you’ll need to pay for any major damages or to rebuild your home out of pocket. In this scenario, few people would be able to pay off their mortgage as well as rebuild. Your mortgage lender will likely require proof of insurance before closing. The amount you’ll need to be insured for will vary but is typically the balance of your loan or higher.
