While you're writing that expensive homeowners insurance check each month, the thought might leap into your mind as to what would happen if you decided to do without the coverage. Unless you're independently wealthy or have influential friends in the banking industry, this probably isn't a good idea. Going without homeowners insurance is a risk that usually isn't worth taking.
Need to Self-Insure
If your home is paid off or your rich Aunt Sadie died and willed you her home free and clear, you won't be obligated to carry homeowners insurance. If you choose to go without coverage, you will, in essence, be self-insured. You will have to pay for any repairs out of your own pocket. On the surface, this may not sound like that big of a deal, but you could find yourself in a bad spot if the house burns down and you don't have the funds to rebuild.
If you have a mortgage and you try to cancel your homeowners insurance policy, you'll likely discover very quickly that your bank doesn't think that's such a hot idea. Your bank has a lien, which is a legal claim against your property. This gives it the right to insist that you maintain adequate homeowners insurance. If you drop your insurance coverage, it's possible your bank could even initiate foreclosure proceedings.
No Lawsuit Protection
Consider what could happen if you're in the process of making repairs on your property but you don't remember to rope off or mark the area to warn visitors. If somebody stumbles over the area and is injured, he could sue you. Without homeowners insurance and the liability protection it provides, a lawsuit judgment against you could have severe financial consequences.
Losing Your Stuff
You could lose your personal possessions as the result of a fire or natural disaster. Without homeowners insurance, not only could you lose that cherished Meat Loaf album collection your father gave you, but you won't be financially compensated for your loss. You may have to go out and get all new stuff while paying for it out of your own pocket.
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