Can I own a home without homeowners insurance?

by Steve Wilson on June 21, 2010 · 0 comments

in Homeowner's

ben_franklin During the early 1700’s, fires were very dangerous threat to the residents of Philadelphia, PA, so  our forefather Benjamin Franklin set about trying to remedy the situation. Under Franklin’s goading, a group of thirty men came together to form the Union Fire Company on December 7, 1736, the first in the city. His famous saying, "An ounce of prevention is worth a pound of cure," was actually fire-fighting advice.

It was to take 140 years, however, until the city of Philadelphia finally created its own fire department in 1871. Yet, Philadelphia has never suffered a conflagration on the scale of the 1666 Great Fire of London, nor of the fires in Charleston in 1740 and Chicago in 1871. This was in large part due to the efforts of — who else — Benjamin Franklin.

Those who suffered fire damage to their homes often suffered irreversible economic loss. So, in 1752, Franklin helped to found the Philadelphia Contribution for Insurance Against Loss by Fire. Those with insurance policies were not wiped out financially. The Contributionship is still in business today.

The first policyholders took out policies for seven years. After expiration, the premium money was returnable, subject to certain exceptions. Fire losses and office expenses were paid with money taken from a proportionate contribution of each policyholder.  Prudence coupled with providence have been hallmarks of The Contributionship.

Unlike driving a car, you can legally own a home without homeowners insurance. But, if you have bought your home and financed the purchase with a mortgage, your lender will most likely require you to get homeowners insurance coverage. That’s because lenders need to protect their investment in your home in case your house burns down or is badly damaged by a storm, tornado or other disaster.

If you live in an area that is likely to flood, the bank will also require you to purchase flood insurance. Some financial institutions may also require earthquake coverage if you live in a region vulnerable to earthquakes. If you buy a co-op or condominium, your board will probably require you to buy homeowners insurance.

After your mortgage is paid off, no one will force you to buy homeowners insurance. But it is not advisable to cancel your policy and risk losing what you’ve invested in your home.

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