Comment by rfrey
3 years ago
Your parent literally said
if, for example, your liquid net worth is 100x the replacement cost of your
home.
and
for the vast majority of people, rebuilding their home is not feasible with
their current net worth.
He's saying you are required by law to buy insurance for your house because of government regulation. There's no way of saying no.
Please point me to this law. Unless you are in a mortgage, no law requires you to hold homeowner’s insurance, and you can absolutely self-insure, to my knowledge.
The same is not true for auto insurance in most states, though most also have an option to self-insure by putting up collateral.
There may not be a law explicitly stating you have to have homeowner's insurance. But.
Without such insurance, specifically the "injury liability type" with its limits; then if someone gets injured on your property there may be no limit to your liability.
So even people who could afford the loss buy insurance because it is the best method of limiting intangible risks.
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Insurance is required by the lender (yes, I understand people purchase with cash outright, but that's a vanishingly small portion of the population).