In most states, if your home is paid for, you aren’t required to have homeowners insurance. However, it is usually much more expensive to not have insurance, and here are 3 reasons why:
Many insurance applications ask the question, “how long have you maintained continues insurance?”. The reason they are asking is this because someone that has had insurance for a long period of time shows that most likely the person is reliable and stable. Insurance companies always are balancing risk, and if you as a homeowner has had insurance for a long period of time, then this reduces risk and makes your premium less. Also if you haven’t had insurance, but have owned a home for a while, then all of a sudden decide to buy insurance. The insurance company is going to look at this suspiciously. It can look like you may file a claim soon after getting insurance, which basically means that they are trying to avoid having to pay a large bill. This may not be the case, but it can look like that. Save money and keep insurance.
This is probably the biggest reason that most people keep insurance. Even the wealthy generally have insurance to cover large damages such as a house fire etc. Most people can’t afford to have something devastating happen, and if they didn’t have insurance then it can financially wipe someone out. If you do want to save money then raise your deductible to a high amount so that you will only use it in the case of complete loss. Homeowners insurance is a smart decision even if you only consider large catastrophes.
Even if you are fine with covering the cost of your home if something happens to it, there is still the issue of liability. This would be if someone is hurt while on your property and sues you, if you do not have insurance then you would personally have to cover the cost of the legal fees and if held responsible the cost of medical bills for the person hurt. This can be a huge amount of money and puts all of your assets and finances at risk. Also the insurance companies have the ability to negotiate lower costs with attorneys and hospitals. Which means if you don’t have insurance then you would probably spend even more in fees then an insurance company would. Having a few hundred dollars a year seems like poor decision over giving up a hundreds of thousands of dollars in protection.
When making the decision to purchase homeowners insurance, make sure that you consider all the costs that you will be protected from and the risk that will be mitigated.