The Effects of Having No Homeowners Insurance
The vast majority of homeowners have a homeowners' insurance policy. It can be tempting to try to do without, especially if you live in an area where premium rates have skyrocketed. In certain circumstances you can own a home without taking out insurance on it, but most experts would agree that it would be very unwise to leave what is probably your biggest asset unprotected.
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Mortgaged Homes
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If you have borrowed money to finance the purchase of your home, your mortgage holder will invariably make it a condition of the loan that you have homeowners' insurance. This protects the lender's investment if there were to be a catastrophic loss of the home in a fire or other incident. You will have to show proof of insurance before the mortgagor will hand over cash to buy the home.
Unmortgaged Homes
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If you are in the fortunate position to be able to buy a home outright, or if you inherit a home with no mortgage, the decision of whether to buy homeowners' insurance is entirely up to you. No one will compel you to take out a policy. Municipal by-laws generally do not require homeowners to have insurance. However, most people in this position do take out insurance of their own volition.
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Loss
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If you do own a home without insurance you are leaving yourself vulnerable to a total loss of a possession that's worth hundreds of thousands of dollars. If your home were to be destroyed by fire or hurricane you would be left homeless and your financial position would be massively reduced. Even if you do not suffer catastrophic loss, you may face hefty repair bills for items that otherwise might have been covered by your insurance. If you have the misfortune to be robbed, you will have to replace your possessions at your own expense.
Liability
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If someone slips and falls on your property, or otherwise suffers an injury, you can be sued for, in some cases, millions of dollars. Most homeowners' policies include a clause to cover medical bills in the event of a liability claim, protecting your own financial position. For this reason, having homeowners' insurance, whether you are compelled to or not, can make the difference between financial security and bankruptcy.
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