New York City · Member since 2018 · 161 posts · 75 votes
Well, I canceled my homeowner insurance last year. We had it for 20+ years and never used it and decided to cancel it because we never ever used it and it would be a 1K expense every year. Fast foward to today, when I am researching HELOC's and HEL's and I find out that banks won't give a HELOC unless the house is insured.
My question is, what type of insurance is needed to get a Heloc? What type of coverage? I did quick quotes online with major vendors and they all come back 3K-4K a year, although Lemonade only came back with $1k. From what I understand my insurance needs to cover the HELOC amount right? So if I only want a 200k Heloc, could I just purchase insurance to cover 200k of value of my house? Or do insurance carriers require me to cover the full valued amount?
Insurance Broker · Kansas City, MO · Member since 2017 · 370 posts · 127 votes
7y
@Wei Jie Yang, since it is your primary, you would need homeowners insurance. A Heloc is added to a homeowners insurance policy similarly to how a mortgage is added. It sounds like you are skeptical with having homeowners insurance, but at my insurance brokerage, we highly advice against self-insuring (not having insurance) as it only takes one decent size claim to begin a major downward spiral financially. Every situation is completely different, so make sure to consult an attorney, but that is how we typically advise our clients when they are considering self-insuring their assets.