Does It Ever Make Sense To Go Without Homeowners Insurance?

You’ve paid off your house, and since you no longer have a mortgage or a home equity loan, you’re no longer required to have homeowners insurance. You’re considering dropping coverage because your real estate is relatively low-budget, but everybody tells you this is a terrible idea. Does it ever make sense to go without this type of insurance?

Probably not, even if you can afford to replace your house and its contents. If liability issues ever develop, that can be extremely costly.

Not Insuring Modest-Value Real Estate

Especially if you have high insurance premiums because you live in an area prone to earthquakes, wildfires or severe weather events, paying that bill may be aggravating. You’d rather put all that cash into your savings. If the worst were to occur, you may already have enough in savings to get a new home constructed or to buy a different house — or at least put a hefty down payment on one. 

Some homeowners have done the math and realized that after a dozen or so years, they could save enough to rebuild a house with what they would spend on insurance. That’s according to an article in The Wall Street Journal from 2007.

Why then do you need homeowners insurance?

Liability Issues

It’s rare for homeowners to go without insurance. Ninety-six percent carry insurance on their property, notes the Wall Street Journal article. 

Homeowners insurance doesn’t only protect you if you need expensive repairs done to your house or if you need full replacement value. It protects you against a lawsuit if someone is ever seriously injured on your property. Without liability coverage, a successful lawsuit could wipe out all your assets. 

Even very wealthy people who have the money to replace a valuable home and its contents — and who could afford to pay substantial funds in a lawsuit — understand the value of homeowners insurance. Why take the risk of shelling out millions of dollars when they could simply pay their insurance premiums? 

Consider Other Options

If the premium bothers you, look into options to lower it. You might raise your deductible to the maximum allowed, for example. You might decide to accept the risk of dropping certain types of coverage, such as flood or wind insurance. Ask about discounts, such as a lower premium for including your automotive insurance with the same carrier as your home insurance.

This may be a good time to shop around for better rates. Contact an independent insurance agent who can provide you with quotes from several companies for the coverage you want. Companies like Axis Insurance Agency can answer your further homeowners insurance questions.