Most buyers take out a mortgage to purchase a home. Homeowners insurance provides protection for both a homeowner and a lender. A lending institution has a financial stake in a property and wants to protect its investment. When a buyer takes out a mortgage, the lender requires the buyer to purchase homeowners insurance. A lender generally won’t provide funds to close on a house unless the buyer has obtained insurance.
If you’re among the relatively small number of people who can purchase a house with cash, you won’t have to take out a mortgage, so there will be no lender involved and no requirement for you to get homeowners insurance. You might think that will be an easy way to save money, but the risks of not buying homeowners insurance can outweigh the potential savings. Even if you’re not obligated to get homeowners insurance, you should.
What Homeowners Insurance Covers
Homeowners insurance covers losses in a wide range of circumstances. If your house gets damaged in a storm, there is a fire, or your property gets burglarized or vandalized, your insurance company will cover costs for repairs or replacement.Â
Policies differ from one insurer to another, and customers can choose what types and levels of coverage they want. If, for example, you have valuable jewelry or artwork, you might need to pay extra to fully insure those belongings.Â
A homeowners insurance policy can cover other costs associated with a covered loss. For instance, if your house needs major repairs and it won’t be feasible for your family to live there while the work is being done, your homeowners insurance company can cover your additional living expenses, such as housing and food, so you won’t have to pay a large sum out of your own pocket.Â
Homeowners insurance can also protect you if someone gets injured on your property and you are found liable. It can cover medical bills and other associated costs, up to your coverage limit.
Why You Should Get Homeowners Insurance, Even If You Don’t Have To
Not taking out a homeowners insurance policy can keep your monthly expenses down, but it’s an incredibly risky way to save money. Although you won’t have to get homeowners insurance if you buy a house with cash, you should.Â
One storm or accident can lead to serious damage or injuries and bills that you can’t pay. A roof leak can cause thousands of dollars in damage. A fire can completely destroy your home and force you to rebuild from scratch. Most homeowners don’t have enough money in savings to cover those sorts of losses themselves. If you don’t have homeowners insurance and someone gets hurt at your home, you can get sued and possibly lose your house and savings. Homeowners insurance can provide you with financial protection and peace of mind.
