Insurance is one of those things that you can’t really appreciate until you need it. In fact, it’s probably crossed your mind a few different times—especially as you were writing that monthly check to your insurance agency—to just do away with coverage entirely. While doing so could save you money upfront, it could come back to haunt you in the long run.
Most Americans Understand the Need for Homeowners’ Insurance
Though most homeowners are like you—they dread making out the monthly insurance check—the majority understand the import of homeowners’ insurance. According to the Insurance Information Institute, approximately 95 percent of homes are insured. Compare that to the insured rate of cars—which is right around 87 percent—and it’s easy to see that people take their homes far more seriously than their vehicles. This is likely because homes are such a huge investment, and one people are just not willing to take a risk on.
Self-Insurance is Not Practical
If you don’t have a Chicago homeowners insurance policy, the risk you’re taking is greater than you think. Homes require maintenance and a lot of it. At first, the repairs you may need to make will be small and easy to pay for out of pocket. However, as a home ages, the issues will grow. Your roof might need to be replaced, a job that costs, on average, between $5,000 and $13,000 depending on your location. Your home might undergo structural issues that cause your foundation to shift. On the low end, foundation repair costs right around $5,000, but depending on the severity of the issue can cost more than $10,000. Unless you’re rolling in the dough, chances are you cannot afford those kinds of expenses out of pocket. If you had insurance, however, you wouldn’t have to worry about it.
Risk of Foreclosure is Real
Most mortgage lenders require borrowers to maintain a homeowners’ insurance policy. If you drop your policy, you may discover that your bank does not think that is such a good idea via a foreclosure notice. That’s right—your bank can begin foreclosure proceedings if you cease to pay your policy. If you need to drop your insurance for financial reasons, consider doing away with some other expense, or even talk to your mortgage lender about restructuring your loan.
You May Lose All Your Belongings
As recent events prove, natural disasters don’t discriminate. The fires in California wiped out thousands of homes and the hurricanes along the Gulf and east coast caused billions of dollars in property damage. Those people lost everything, but most of them were able to obtain the money they needed to rebuild via their homeowners’ insurance policy.
If you are the victim of a natural disaster and don’t have a homeowners’ insurance policy, you risk losing everything and having no money with which to rebuild. For most people, that is not a risk they’re willing to take.
It is never a good idea to go without homeowners’ insurance. If you’re at a point in your life where finances are tight, talk to a financial advisor about ways in which you cut back on your spending that do not involve doing away with necessary protections.