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Home » Home Ownership

A Humbling Reminder of why you Need Home Insurance

Last updated by on 10 Comments

Just another sunny, 75-degree early evening in March in Michigan… OK, that’s not so normal…

Clouds started to roll in quickly. The skies started to turn grey. Then thunder. Lots of thunder. Weird thunder. Non-stop rumbles for 10 minutes? Hadn’t heard anything like it. It sounded like I was in a bowling alley during happy hour (back before Wii bowling, that is).

Then all of a sudden, the tornado sirens started blaring, It wouldn’t be the first time they’ve gone off, but something was different about this storm.

I turned on a local TV station to see what was heading my way only to find a big red/purple blob on the doppler (red/purple = bad).

Quarter-sized hale started pelting my roof. You know the sound of a rock hitting the side of your car when driving across a dirt road? Sounded a bit like that.

The meteorologist then started sounding a bit anxious and shared reports of a tornado touching down about 10 miles from my house and it was heading directly towards us.

“Shit! What do I do? I live in a walkout house. Do I go downstairs? I don’t have a TV down there. Do I take the pets with me? Do I stay by the TV so I can see what’s going on? Do I keep a look out through the windows for a tornado? Meteorologist is telling me to get away from the windows, OK. Man, I’m glad I have home insurance!”.

A very nervous 10-15 minutes went by before reports showed the tornado’s path to be just south of my home. I breathed a sigh of relief. Disaster had been avoided, but barely.

The owners of this home were not so fortunate…

do i need home insurance

We don’t get tornadoes too often in Michigan and when we do, they usually aren’t severe. I’ve caught myself thinking, “oh, that could never happen to me”. I’m sure many of you out there have had the same thought, whether it’s tornado, a flood, fire, or hurricane.

And no doubt a few of you frugalites have even contemplated the idea of getting rid of your home insurance altogether, or at least trimming it. Gratefully, it appears (as they proclaim their love for State Farm Insurance), this family did not. Nobody was hurt as well, thankfully.

The whole experience has given me a new appreciation for the peace of mind that insurance offers. You need home insurance. I know it can be painful to keep sending in your payments as years and decades go by without getting any sort of return, but the few hundred dollars per year (I pay about $350 per year through Liberty Mutual) you are paying for the insurance may end up protecting you from a catastrophic financial loss.

Material possessions can be replaced. Decades of work needed to pay off a mortgage on your ruined home and the building cost of a new one cannot. It’s not worth the risk.

Home Insurance Discussion:

  • Have you or someone you’ve known had a home that was completely or partially destroyed?
  • Did you/they have the necessary home insurance to cover the damage or replacement?
  • How much do you pay per year for home insurance?

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10 Comments »
  • camelian says:

    I have home owners insurance and though I am very frugal, that is the last thing I would ever drop. To me, being financially responsible means spending wisely, not saving every penny regardless of where it’s coming from.

    Last month there was a small tornado that touched down near my house and ended less than 1/4 mile away from me. Tornados are not that common here, especially during this time of year. Just goes to show that you never know what can happen.

    I pay about $600/yr for coverage on 140k with Allstate. Am I overpaying?

  • Modest Money says:

    Glad to hear that your house wasn’t damaged, but it still sounds quite stressful to deal with. Home insurance definitely would give you some peace of mind. Where I live I don’t have to worry about things like tornadoes, but we are on earthquake fault line. People keep saying we’re due for a big one. So when I own a home, I’m going to make sure I’m properly insured. You never know when disaster might strike.

  • Broke Guy says:

    About $760 a year. This covers the house for $170,000. Possessions for $129,000. It also covers major appliances, and my wife’s wedding ring.

    A house is the biggest investment you’ll make. May as well make sure it’s protected properly.

  • Warren says:

    Normally you invest money and you want the best return on investment. With insurance, you want the worst return on investment. I will gladly pay medical insurance and never get sick, buy life insurance and live to 100, pay car and house insurance and never have a claim.

    If you ever have an home or renter’s insurance and have a claim involving water, never use the word flood or any variation of it. Unless you bought separate flood insurance, the insurance company will use that word as an excuse to not pay. I knew someone years ago who lived on the bottom floor of an apartment complex. The landlord didn’t fix the roof and when it rained the bottom level had over a foot of water. My friend stated that her room was flooded and the insurance refused to pay, even though there was no flood.

  • mikeBOS says:

    This assumes houses are expensive, difficult to replace, and are your largest asset. I suppose that’s typical for most people, but it is possible that that’s not everyone’s situation. If you were living in Detroit and your home was destroyed, you could just walk down the street and buy another one for a few thousand bucks. So why spend almost $1k/year insuring the one you’re in?

    I own two homes, but they’re not my biggest asset and I could replace them with a portion of my annual income. I do keep high deductible policies on them, mostly for the liability coverage. But I do analyze the decision annually and don’t rule out the possibility of dropping coverage if the numbers make sense.

    • G.E. Miller says:

      You answered your own question: liability. In the Detroit example, even if the house wasn’t worth anything, you would still probably want liability on it. And if you live in a house in Detroit “worth a few thousands bucks”, you probably have bigger things to worry about than home insurance. Home insurance is also directly correlated to the value of the home, so the less it is worth, the less it will cost. You wouldn’t spend $1k per year on a house worth a few thousand bucks.
      Plus, in Detroit, there’s a good chance your house will be burned down, so you might as well get the insurance payoff and move elsewhere.

  • Ron Ablang says:

    In Sacramento, we don’t really get tornadoes. My home insurance is currently $350 a year. Yes, it’s a really good price. Don’t know much about the company: Universal North America Insurance Company.

  • Andre says:

    I recently purchased a very decent 2000 sq ft. short-sale single-family home for $60K all cash, on a golf course four miles west of the Atlantic Ocean in east-central Florida. I do not have a mortgage, so property insurance is not required. The best rate I could find was $1800 per year with a $5K deductible. Wind/hurricane damage carries a higher deductible. I’ve decided to self-insure, though my butt is hanging out there w/o the personal liability insurance provided with a homeowner’s property insurance policy.

  • Andre says:

    Ok, I just shopped around a bit more. While AllState will not write any more property insurance in my part of FL, my local AllState agent brokers insurance for six other companies. Since I’ve been uninsured for over 30 days, three of those companies won’t touch me. The state sponsored insurer of last resort – Citizens – comes in the lowest at $1700 per year with a $5000 deductible for fire/theft/liability and a $17,000 deductible for windstorm damage done under a named hurricane or tropical storm.

    The $17,000 deductible is computed as 10% of the “replacement cost” of the house. According to AllState’s computers, the replacement cost of the house is $170,000 even though I bought the house seven months ago for $60K and the county property appraiser puts the market value of the house at $75,000 for tax purposes.

    If I drop the windstorm/hurricane coverage, my annual premium drops to $700.

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