What Happens If You Don't Have Home Insurance?

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Worst-case scenarios don’t happen often, but they do happen. That’s why it is important to know what happens if for some reason you aren’t protected by homeowners insurance. The answer serves as a grim reminder of the value of insurance and underscores why you do not want to be caught without it. Here are some of the scenarios that can play out if there’s a disaster and you don’t have coverage.

Greater risk of defaulting on mortgage

If you’ve financed your home, you are likely required to carry homeowner’s insurance. If your coverage has fallen through the cracks and you are without insurance when a worst-case disaster strikes, the debt you may incur in repairs can make it difficult to also make your house payment. This means you are more likely to default on your mortgage and lose your home.
Your mortgage lender may also place you in default status even if your home remains safe and sound. This would be because you violated the terms of your mortgage agreement to carry homeowner’s insurance for the life of your loan. Such action also can result in the loss of your home.

You lose your home to natural disaster

If a tornado rips your home apart or wildfires burn it to the ground, you are left fully responsible for the damage. This leaves you owning the ground beneath your home but no home to live in. Without insurance, you must pay for all repairs or rebuilding out of pocket regardless of any steps you took to protect your home from natural disaster.

Possessions are lost

Whether by natural disaster or burglary, there is no remuneration for personal possessions if a loss occurs and a homeowner had no homeowner’s insurance. Granted, nothing can replace an heirloom like your grandmother’s wedding ring, but you won’t get any financial payout to soften the blow.
You also could find yourself replacing all of your possessions in the event of a disastrous loss. Replacing all the little things you own and need adds up quickly. Think of how much you spent amassing furniture, appliances, electronics, kitchenware, hygiene items … the list goes on and on.

You get sued

If someone gets hurt on your property, a tree falls on a visitor’s car, or your dog bites the mailman, you become liable for property damage and bodily injury. We live in a litigious society, so don’t assume your friend or neighbor won’t seek legal action. If the loss or injuries are great, everything you own (your house, investments, personal possessions) become at risk. With even standard homeowner’s insurance, you get a degree of protection against such lawsuits.
Having no homeowner’s insurance and then being found responsible for a major liability might be the worst-case scenario of all. Anything of value amassed throughout a lifetime could be seized to pay the debt, and your credit takes a huge blow, too. Rebuilding from absolute scratch is not for the faint of heart.

You might have a hard time selling your house

If you’re thinking about selling your house and have allowed the homeowner’s insurance to lapse, this can actually impact your home’s desirability to potential buyers. During the closing process, there is a risk that significant damage could occur to the home, and the party responsible may fall into a gray area. Also, if a potential buyer realizes a homeowner did not carry insurance as should be done, other questions of upkeep and transparency arise that make the house less desirable.

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