3 Reasons 'Going Bare' on Home Insurance Is a Huge Mistake

Homeowners insurance is one of those expenses you should expect to take on when you buy a home. In fact, you generally need homeowners insurance to secure a mortgage. 

But what if you own your home outright, or you're buying one in cash that you don't need to borrow for? In that case, you may be able to technically get away with not having homeowners insurance. And unfortunately, that's a route some property owners seem to be taking.

Simply Insurance reports that while over 95% of U.S. homeowners have an insurance policy to protect their properties, there's a small percentage of homeowners who don't have coverage, also known as "going bare." Now, if your homeowners insurance costs have risen lately, you may be inclined to forgo coverage yourself. But here are three reasons why that could prove to be a very costly mistake.

1. You could lose your home entirely if it sustains major damage

If you have a lot of cash in your savings account, you may decide to just skip out on having homeowners insurance because you're tired of your costs going up and instead plan to dip into your cash reserves when damage occurs. The problem, though, is that in an extreme situation, you could end up needing to rebuild your home entirely. And while you might have the money to cover $15,000 worth of flood damage, you may not have nearly enough savings to shell out $250,000 to build your home again from the ground up.

2. You could lose all of your belongings if they're destroyed in a fire or flood

It's not just your home itself that homeowners insurance is meant to protect. The right policy could also help ensure you can get reimbursed if your belongings, from furniture to electronics to artwork, are damaged due to an issue within your home (like an electrical fire) or a weather-related event. Without insurance, you might end up having to replace a host of expensive items.

3. You could get sued if someone gets injured on your property

One common component of homeowners insurance is liability coverage, and it protects you financially if someone gets hurt on your property. And that injury doesn't have to happen indoors. If someone slips or trips while delivering a package to your door, they could potentially initiate a lawsuit if your property contained a hazard, like an icy path or uneven sidewalk. If you go without homeowners coverage, you could find yourself getting sued personally for such an injury. 

How to find more affordable homeowners insurance

Going bare on homeowners insurance might seem like a cost-effective solution when your premiums keep rising. But in the end, you could face catastrophic costs in the absence of insurance, so it's best not to forgo that coverage. Instead, try to find ways to make your homeowners insurance more affordable. Some options include:

• Updating your insurer after making safety-related improvements to your home, such as installing a doorbell camera or alarm system
• Getting rid of elements that can be considered hazardous, such as filling in an in-ground pool
• Shopping around with different insurers for better rates
• Bundling your homeowners and auto insurance policies for a discount

No one should skip out on homeowners insurance entirely. And while it's getting harder to find coverage in certain states due to an uptick in extreme weather, there are still insurers to consider in those situations. Make that effort so you don't wind up in a dire spot by not having coverage at all.