Do I need home insurance for buying home with cash

8 Replies

I am planning to buy a home with cash. So, I will rent this home in future. Do I need to buy home insurance? Should rental insurance purchase by tenant cover the liability?

1) You need homeowners insurance, regardless - what if you got sued?

2) Renters should get their own renters insurance, but that won't cover YOU (at least not to the extent you'd need it to, if something really bad happened).

@Syed Firoz  Amanda is correct.  Renters insurance is for the renter, hence the name. 

 The big difference is that renters insurance covers all of the renters possessions in the case of a fire, theft, ect.

On the other hand, landlord insurance covers the structure and property that you own. Not the renters.

Hope this helps Syed!

Thank you guys to educate me about this.

Landlord insurance likely isn't required if you own the home outright. But why place your cash at risk like that? I've heard of folks self insuring but you've got to have a lot of properties to make that work.

Just to clarify there is no legal requirement to carry insurance. Mortgage companies require it as a civil matter because if the home burns down they want to be sure that their loan gets paid back or the structure rebuilt. So no you do not have to carry insurance.

That being said you most likely want it for both hazard and liability reasons. I have purchased 2 homes cash that I did not insure immediately. But it was a calculated reason, and there weren't any tenants in place upon purchase.

@Mike M.  

prior to my getting bought out of my last company ( we had 350 sfr's) we were on the verge of self insuring... Just for Hazard not liability.. I think the biggest risk we had being in the south was from wind and hail.. In all the years of all the homes I have owned and or loaned on and that is in the multi thousands. We have had 2 fires were the house was totaled. And no liability claims to date knock on wood. But lots of hail and wind... I wonder what blackstone and those bigger hedge funds are doing it brings up a good point.

Especially low end properties... when buying low end rentals for 50k or under. Your not going to rebuild them if your self insuring cost far to much to replace than what the true value is.. ( this is true in most of the US were values for existing homes are sub 100k)

So for us we were paying say 50 a month for insurance X 350 or 17.500 a month.. we could replace the homes for 50k no problem ( as we buy direct and wholesale) so if we cut the insurance down to just liability the idea was we could just insure under our big umbrella policy.. So as long as we did not lose a house to fire every 3 months we were way ahead self insuring.

But I got my golden handshake and off I went

We have liability and fire insurance only for our SFR rentals. Our condo rentals are covered under the association's master policy, so we only have liability on those. We also have an umbrella policy. Tenants in the condos are required to carry renter's insurance. We highly recommend it for the tenants in the SFRs, but they're in low income areas and we don't require the tenants to get it - but we do make them initial the clause in the lease that states that they are declining it, and they understand our insurance does not cover any of their belongings.

Like everything, its based on your risk

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