Why You Need Homeowners Insurance -- Even if You're Buying a Home in Cash

It's all about ongoing protection.

There's a reason some home buyers are tempted to purchase property in cash rather than get a mortgage. With a cash offer, you often get a leg up over the competition. And in a tight housing market (like the one we're in today), that's a big deal.

Also, not having a mortgage means not having to pay interest on a loan. There can be a lot of savings there. 

Finally, paying cash for a home can mean a quicker closing, since you won't have to wait for your mortgage paperwork to be finalized and for your lender's various various requirements to be met. One such requirement is putting a homeowners insurance policy into place. 

Why do mortgage lenders care if you have homeowners insurance or not? It's simple. If you fall behind on your monthly loan payments, your lender can force the sale of your home and use the proceeds to get repaid on your outstanding loan. But if your home is destroyed and uninsured, in that situation, your lender is out of luck.

Now if you're buying a home in cash, you can technically get away with not buying homeowners insurance. But here's why that's a big mistake.

You still need protection

When you own a home, there are a host of things that have the potential to go wrong. Your home could be damaged during a weather event. Or, it could sustain damage in the event of a fire. Meanwhile, someone could come to your property, slip on your newly washed marble flooring, and wind up with a concussion they decide to sue over. 

All of these incidents can be catastrophically costly for you to bear. And that's where homeowners insurance comes in.

If you have homeowners insurance, you have protection if a storm knocks off your roof or if a fire destroys your home's entire upper level. And homeowners insurance generally also comes with liability coverage, the purpose of which is to protect you if someone is injured on the premises. This is the sort of protection you should want at all times -- regardless of whether a mortgage lender is requiring you to get it.

How to find the best homeowners insurance

The downside of getting homeowners insurance is having to pay for it. But that doesn't mean you'll pay a lot.

If you want to save on your premiums, first, do plenty of rate shopping. Talk to different insurers and see what numbers they come back with. If you have a car, you can also try seeing what rates you can snag by bundling your homeowners and auto insurance policies.

You can also keep your homeowners insurance policies lower by opting for a higher deductible. That's the amount you'll pay out of pocket when you file a claim. 

Homeowners insurance is the sort of thing you really can't afford not to have -- even if you can afford to buy a home outright. So don't let the fact that it's not a requirement stop you from getting the protection you need.