Do You Really Need Homeowners Insurance

Q: Our homeowners insurance premiums keep going up. Our deductible is high anyway. Do you think we really need property insurance? Darryl, Clifton, NJ

A: The main purpose of property insurance is to protect against catastrophic or total loss. Despite the fact that higher premiums and higher deductibles make insurance seem less valuable, most people don’t have the financial resources to replace a property in the event of a total loss. Nevertheless, 12% of US homeowners don’t have homeowner’s insurance and I suspect that percentage will rise. People who have liquid assets sufficient to rebuild their home and remove the debris from a home destroyed by a catastrophic event can choose to forgo homeowners insurance–but for most people that is not a viable option. Even if you have the money to replace your home in the event of a total loss, in most cases it’s smarter financially to pay the insurance premium and deductible rather than paying out of pocket to completely replace a home. Thanks for your question, Darryl.

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