As the cost of homeowners insurance goes up, the number of homeowners who are insured is going down. Currently "88% of homeowners are covered," a decline "from upwards of 95% just a few years ago," said Money , citing "the latest data from the Insurance Information Institute (III), an industry trade group."
It is understandable that some homeowners are arriving at this decision — there has been a "rapid pace of premium increases" in recent years, alongside "the typical inflationary pressures of late," said Money. And to be fair, in some instances, "insurers are pulling out of high-risk areas, leaving residents in a scramble to find replacement coverage."
But even with the pressures that paying for homeowners insurance can create, it's still not worth the financial gamble of going without.
1. You may not be able to afford repairs if you experience a natural disaster
One common reason that people forgo homeowners insurance is they think they "can afford to pay for repairs out of pocket," said Policygenius . This might be the case with "minor and moderate repairs, but rebuilding a house after a fire or tornado could run you hundreds of thousands of dollars."
Those who go without homeowners insurance "would need to cover the costs of repairs or rebuilding their home personally with no help," said The Ascent . And if someone had a mortgage and managed to slip by without coverage, "the owner would still be responsible for paying their home loan off too — even if the house was destroyed."
2. You won't have coverage for your personal property
Homeowners insurance doesn't just cover the structure of your home — it generally also covers personal property within the home. And even if it might not seem like it, the value of all those things laying around can add up. "Typically, even someone with the bare minimum of furniture and belongings owns tens of thousands of dollars' worth of stuff," said The Ascent.
If you don't have homeowners insurance, you are on the hook for paying to replace whatever you lost. In the instance of a home break-in, for instance, if you would "struggle paying to replace your laptop, TV or anything else you can imagine thieves taking, homeowners insurance would soften the financial blow by replacing stolen items," said Experian .
Depending on the policy, you may also get coverage "when your belongings are taken outside of the home as well, such as if there's a theft in your hotel room or your child's college dorm room," said Experian.
3. You won't have protection against potential lawsuits
Another way homeowners insurance protects you is through personal liability insurance, which "pays for legal or medical expenses if you are found liable for injury to someone else or damage to their property," said Policygenius. Similarly, you might also have medical payments coverage, which "pays for medical bills if a guest is injured while in your home, regardless of who is at fault."
Without homeowners insurance, you would be totally responsible "if an acquaintance at a party you're giving trips on your stairs, gets injured and decides to sue you," said Experian.
4. You could risk losing your home, depending on your mortgage lender
Last but certainly not least, forgoing homeowners insurance could put your home itself on the line if you have a mortgage. That's because "if you're paying a monthly mortgage , you probably have no choice but to pay for homeowners insurance," said Experian. You might think you can sneak by, but "if your mortgage lender requires it and discovers your home isn't insured, it could initiate foreclosure, resulting in the loss of your home."
Another possibility here is that "the mortgage company can take out a policy on the home and charge you for it anyway," a process that's called "'force-placed' mortgage insurance," said Money. Usually, that coverage "comes with a hefty price tag" that exceeds what you would have paid for homeowners insurance. Plus, said Money, "a force-placed policy only protects the lender, and not you if your home was destroyed or damaged."
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