Can I Own a Home Without Homeowners Insurance?

Homeowners insurance is designed to protect your house (the physical structure,) and your property. Under some circumstances, there is no law or other requirement to force a homeowner to purchase homeowners insurance in order to own a home. Many people who own older homes don’t insure the home, but if you don’t purchase homeowners insurance, you could lose everything, and be forced to face financial destitution. There are circumstances under which you absolutely have to purchase homeowners insurance in order to complete the transaction for the purchase of the home. Who Doesn’t Have to Have Homeowners Insurance? If you are building or buying a home and don’t need a mortgage to pay for the home, you won’t be forced to purchase homeowners insurance. In a case like this, if you don’t purchase homeowners insurance, any catastrophe could wipe out all of the equity you had in the home, and you would be left without the finances to either repair or replace your property. You would lose everything. When Purchasing a Condo If you buy a condo, the physical structure is insured under the property owner’s insurance. If you pay for the condo in full, and don’t need to borrow the money to finance the purchase, you don’t have to purchase homeowners insurance, but without doing so, you have no protection for any of your personal property. This is another situation where you could face financial ruin. Mortgages to Buy or Build a Home or Condo If you borrow money in the form of a mortgage, whether to build a new home, or to purchase an existing one, the lender will demand proof that you have a homeowner’s insurance policy. Unless you can bring your lender a copy of the policy as proof that the home is insured, none of the papers that finalize the mortgage can go through. You will also be required to include the lender as a co-beneficiary on the policy. The reason for this is to provide the lender with the assurance that if the home is destroyed by something that is specifically covered by the policy, the lender will recoup their money as soon as the insurance company issues a check that is made out to both you and the lender. Since the check is made out to two beneficiaries (you and the lender,) you won’t be able to cash the check without the lender’s signature. The insurance money is supposed to cover whatever is still owed on the mortgage. If the amount of the check is for more than what you still owe on the mortgage, the extra money goes to you. Homeowners insurance isn’t that different than health insurance. In both cases, you are paying to insure something of great value (yourself, your family members, or your home and property,) in case of something catastrophic. Without the homeowners insurance, you could be totally wiped out financially, without resources to rebuild your destroyed home, or repair any damage. Since you also insure the contents of the home, homeowners insurance provides you with the assurance and peace of mind that you will be able to get enough money to replace lost possessions – as long as you insure your property for replacement as opposed to actual value.)

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