[Analemma_]

I could be wrong, but I don't think there are any states where you are required by law to have home insurance. The issue is that banks won't underwrite a mortgage for an uninsured house, because without insurance it's a completely unsecured asset whose value would go to zero at any time. (And if a bank won't write a new mortgage for it, the value drops dramatically even if it's already paid off, because now the potential market is limited to cash-only buyers for a risky asset)

You're free to go without insurance on a house that you own, but so long as the bank owns it, they're going to make insurance mandatory, and that has nothing to do with lobbying.

[marcosdumay]

> whose value would go to zero at any time

No, it wouldn't. It would go down to the value of the land (where a construction is permitted).

Nowadays, that's often more than 90% of the price.

[robocat]

> value of the land

Only very approximately - it depends on contextual situation.

We had a ton of uninsurable "as-is" houses after the Christchurch Earthquake. Prices for those houses dropped massively because without a mortgage you only get cash bidders so demand was relatively low compared with supply. The price someone is willing to pay for an as-is property depends on many factors, and it can easily be below land valuation.

Firstly desperate or naive sellers would accept well below the land value. You assume that that there are enough buyers to compete. There were not enough buyers shortly after the quake because not enough had cash so there were very cheap properties. Plus you were buying risk too - you simply couldn't price correctly because there were too many unknowns - when whole suburbs are uninhabitable a new construction is irrelevant. The city population dropped significantly.

You could offer below land value on some properties because you are also purchasing a liability e.g. the council required some houses to be demolished & removed (demolition costs were tens of thousands - and demo companies were busy as fuck).

You might pay a lot more than land value:

• Some places could still be rented (uninsurable is not uninhabitable) so potential income mattered.

• Many places just needed work done - sometimes not much - but often a new foundation e.g. lift house and put in new foundation. New foundations had to be compliant with earthquake strengthening rules so usually very very expensive. The as-is homes were often sold by the insurance companies because they were uneconomic to fix.

I advise everyone to be very careful buying property in suburbs or cities where all houses have common/correlated risks of an event - floods - fire - etcetera. Insurance premiums will rise until it is unaffordable - then all houses will not maintain value. Disclosure: I do live in a flood prone suburb but I can afford to self-insure and most people cannot do that.

Even worse: insurance did not cover the financial losses for many people in the Christchurch Earthquake. Especially small businesses. Then again - many other people ended up with huge payouts and were financially much better off. However even then money is usually a poor substitute for emotional costs.

[positr0n]

Woah, where can you buy a house that 90% of the money you spend is land? Is that even true in expensive downtown US cities like SF and NYC?

Construction is pretty expensive too.

[marcosdumay]

My home has pretty much 80% of its value as land. And it's not in a anormally expensive location in my city.

[epolanski]

You are not wrong at all.

Home insurance isn't mandatory, but refinancing your mortgage is impossibile without one.