What happens if you don’t have homeowners insurance?

Owning a home comes with its own set of rules and responsibilities. You typically have a mortgage payment and your lender may require you to carry home insurance. You will also have things like maintenance and repairs to take care of. Then there’s property taxes, maybe an HOA or PMI as well. 

These costs can start to add up and looking for ways to save money usually comes with the territory. You may have even asked yourself if you needed homeowners insurance or not. Or your home may be free and clear and you don’t see the need for home insurance any longer.

You really have to weigh the risks. Home insurance will protect you for various issues. If you live in an area where it’s common to have natural disasters, or you want to be protected from someone being injured on your property, homeowners insurance can still be a great idea. 

Is homeowners insurance a requirement? 

This depends on whether or not you carry a mortgage on the property. If your home is paid off, free & clear, you are not required to carry homeowners insurance in most states. It does vary from state to state so you’ll want to check with a local insurance agent in your area. If you just so happen to be in California, please feel free to reach out to one of our homeowners insurance agents. Not only are they incredibly smart and well versed with regards to home insurance but they are also very nice people! Call us today 916 313 6100.

If you have a mortgage on your home, more than likely you will be required to carry homeowners insurance. By carrying homeowners insurance you’re less likely to default on your loan. If something happens, your home insurance will probably cover it. Very often your mortgage bank will require that you show proof of insurance before closing. 

What happens if you don’t have homeowners insurance?

By now we know if you have a mortgage on the home, you should also have homeowners insurance with it. But what if for whatever reason you do not have homeowners insurance, what will happen? We go over a few different scenarios below;

The lender can send the home loan into default

More than likely you will have to show proof of homeowners insurance before closing. For whatever reason let’s say you cancel your policy after closing. Typical mortgage documents state that homeowners insurance is a requirement through the life of the loan. By cancelling you are violating that agreement with your lender. 

The homeowners insurance company will contact the lender and let them know that they no longer insure your property and your policy has been cancelled. 

Once your lender receives word that your home insurance policy is no longer active and that you are in violations of the term of the loan, they can be as drastic as to put your loan into default since you aren’t living up to your part of the bargain. This can affect your credit score, and potentially lead to foreclosure. 

If your goal is to switch home insurance companies, make sure the new policy is in place before cancelling the old one. This should prevent a lapse in coverage and help you to avoid the majority of negative circumstances. 

A natural disaster could cause sever damage

If your home is free and clear and paid off, having homeowners insurance isn’t a requirement. Let’s say for example you decide to cancel your homeowners insurance to cut down on your monthly outgo. Everything is going great until a California wild fire burns down your home. The land still exists but there is no longer a structure on the land. 

As long as you have the correct homeowners insurance coverage, the insurance company will take care of the damages. Some of the other natural disasters that might be covered are hail damage and severe wind. If you did not have an insurance policy in place it will be up to you to cover all the damages out of pocket. This would apply to all of your personal belongings as well. 

Homeowners insurance is in place to cover one of our biggest investments most of us will make within our lifetimes. Making sure it’s 100% covered should be a top priority. The minimal cost associated with home insurance is well worth it. 

Someone is injured on your property & decides to sue you

If you like to entertain or have friends and family over often there’s always a chance someone can get hurt. Especially if you have a pool frequented by your neighbors, or maybe you have a young dog that has a problem with bitting. Having a policy in place to protect you from legal matters can save a lot of time and money. 

With the proper liability home insurance you should be covered for medical bills and legal fees. The amount of coverage you have will be dependent on your needs. If your net worth is on the high end, it’s always a good decision to look into additional liability coverage to make sure you’re covered. 

If you have additional questions regarding homeowners insurance please feel free to reach out to one of our agents 916 313 6100.