Most people are aware that in order to drive, they must possess auto insurance coverage, either through the vehicle they are operating or a personal policy. It’s the law. Driving while uninsured can result in a large fine, the impoundment of your vehicle and the suspension of your license.
Home insurance is less cut and dry. There are no legal repercussions that force the resident of a home to maintain coverage while they inhabit the premises. There are, however, circumstances that can make the acquisition of a home, or even the occupation of a rented space, such as an apartment, impossible without insurance.
It is common that mortgage-providers will demand proof of insurance before lending to a homebuyer. So while this doesn’t make it impossible to purchase and own a home without insurance, it does make it exponentially more difficult. Unless you are able to find a lender that foregoes the inclusion of the insurance clause, you’re only alternative is to purchase the home without taking out a mortgage. And as you might guess, that can be more than a little bit difficult.
Though not nearly as common as with a mortgage, an insurance clause is sometimes included for renters. Rather than demanding the prospective tenant possess home insurance, a landlord can refuse rental to an applicant if they do not provide proof of renters insurance. Renters insurance is less expensive than home insurance because the coverage is less extensive, protecting possessions within the unit, rather than the unit itself.
Insuring your residence is not mandatory for either owners or renters, but especially for the former, it is usually necessary for the acquisition of a dwelling.
If you Don’t Need it, Should you Ignore Insurance?
If you find yourself in a situation where you can procure a mortgage sans home insurance, you may be tempted to look at it as an opportunity to save $1000+ each year. That is an attractive option for obvious reasons, but it’s a gamble. Home insurance covers a lot of expenses, including damage to your property, theft of possessions and liability against on-premise injuries.
Considering your home is likely to be the largest purchase you ever make, it’s certainly not a bad idea to protect it. You may look at insurance as a financial drain, but there is unfortunately, a good many things that can go wrong with a home, from a flooded basement to a fallen tree, and any single event can lead to costs that easily outweigh the savings from avoiding a decade of monthly payments.