There are certain circumstances in which one can own property without taking out homeowners insurance but the majority of insurance experts agree that leaving what is most likely your biggest asset unprotected is not the most sensible thing to do.
Bonded properties
If you have taken out a bond to buy a house, taking out homeowners insurance is very likely to be a condition of the approved home loan. This is done to protect the investment of the home loan provider in the event that the property would be damaged or lost in, for instance, a fire or due to another unfortunate or natural incident.
Un-bonded properties
Some people are in the fortunate position to be able to buy property outright or inherit a home, in which case the choice of whether or not to take out homeowners cover is up to the owner. Making a decision like this can have various reasons, but no reason seems good or sensible enough if you take the enormous risk factor into consideration. Two of the main risk factors are:
Loss of your property
· Should you decide to go without homeowners insurance, you run the risk of a total loss of your most valuable asset that may be worth millions. If your home were to be damaged or destroyed by a fire or due to other circumstances, you would not only be left without a home; you would also suffer catastrophic financial loss. Even if your home would not be completely destroyed, you would have to spend substantial amounts of money to repair the damage and it is not very likely that you would be able to pay for these repairs from your own pocket, especially if the damage is quite substantial.
Liability in terms of injury or death
· Should someone, a friend or a visitor, somehow suffer accidental injury or death, you will be held liable for any (medical and other) costs related to the injury or death, and you could be sued for millions of rands. Most homeowner policies include liability insurance which covers medical expenses, so that your own financial position is protected.
No matter how you look at it and whatever your reasons would be to not take out homeowners insurance cover, the decision could have far reaching consequences; with the worst being total bankruptcy. You'll have to ask yourself whether the premium savings are worth taking this tremendous risk.