3.5 Million Americans Don’t Have Home Insurance

Posted On Wednesday, 21 April 2021 21:37

Most people who own a home have homeowner's insurance -- as many as 95 percent of homeowners, in fact. But 5% of over 86 million people still leaves millions of homeowners without proper insurance.

Moreover, many homeowners don't know how much insurance they have, or what it will cover. Surveys have shown that almost 25% of homeowners have no idea how much liability insurance they have on their home. And almost half do no shopping around or comparing rates at all. And many don't even know what their insurance actually does for them!

Why You Should Have Homeowner's Insurance

What does homeowner's insurance cover? In short, homeowner's insurance is there to help repair or replace your home (and the things in it) in case of things like fire or theft. It may also cover you if someone is injured while on your property, or if you accidentally damage another person's property (like a tree branch in your yard falling on your neighbor's car, perhaps).

How many homeowners end up filing insurance claims? About five percent, according to statistics, which is still millions of families and homeowners. The vast majority of insurance claims (close to 96%) are for property damage: wind, hail, fire, water damage, and burglary. Wind and hail are the most frequent causes of property damage, while fire being the most expensive.

The average claim for home property damage is about $13,000. Liability claims, while far less frequent, can approach $20,000 or more. In short, these are not costs you want to handle out of pocket.

Is Home Insurance Mandatory in the United States?

One reason why you should get homeowner's insurance? Because in many cases, it's required.

If you don't buy or own your home outright, you'll need a mortgage, and a mortgage lender will most likely require you have insurance for the home. If you want to refinance your home, you'll need to provide proof your home is insured before the mortgage company will follow through.

In addition, other types of insurance may be required depending on where your home is located. For example, homes built on flood plains or other high-risk flood zones will likely require flood insurance -- not just for the owner's piece of mind, but for the lender's as well.

If you don't have a home insurance policy, your lender might even buy the insurance for you and pass along the cost to you. That can be less than ideal, as having your lender provide your insurance can be more expensive than what you could find shopping around for homeowner's insurance on your own.

If, on the other hand, you own your home outright, then homeowner's insurance isn't mandatory -- it's your house, after all! But that doesn't mean going without home insurance is a good idea.

Here are some other benefits provided by homeowner's insurance:

  • Obviously, if your home is damaged by a natural event or accident, your insurance will cover it. But a good homeowner's insurance policy will also cover attached structures like decks, sheds, garages, fences, and so on. 
  • Personal property coverage will help replace belongings that are damaged or lost. 
  • If you are found to be legally responsible for someone else being injured on your property, liability coverage will help cover things like medical bills, repair costs, and legal fees. 
  • Last but certainly not least, a good homeowner's policy will provide additional living expenses coverage, so if your house is rendered uninhabitable due to fire, flood, or other circumstances, your coverage will help you pay for hotel bills or other temporary living expenses. 

Why Some Homeowners Don't Have Home Insurance

While homeowner's insurance is almost always required for the approval of a mortgage, there are some reasons why a homeowner might be unable to get insurance.

For example, if the applicant's credit history is poor and full of non-payment or collection issues, an insurance company may decide the risk is simply too great and deny insurance based on that. Some insurance companies even look at your driving record and previously filed claims to see how risky the applicant is.

Another reason why an insurance company might deny your claim? Location. A house that's located in a high-crime area, or an area prone to natural disasters (like sinkholes, tornadoes, and the like) may prove too big a risk for some insurance companies. Also, if the home is in poor condition (due to wear, inferior materials, and so on), an insurer might decide they can't reasonably provide coverage.

Does this mean you simply have to go without homeowner's insurance? Not necessarily. If you end up having difficulty obtaining homeowner's insurance, you can ask your neighbors, your real estate agent, or an independent insurance agent and see what you can do to address the problem. You might also be able to get coverage through what's called "surplus line" insurance, which is more expensive than a regular policy, but is not subject to the same regulations governing homeowner's insurance.

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