Even if you don’t have a mortgage, your home is probably worth several times your annual salary. Most people can’t afford that loss if it burns down, gets hit by a tornado etc…
Also, consider that for a great many Americans, their house is the only significant asset they have.
A huge number of Americans have no retirement savings at all [1]. For some of these people who do own a house, selling it at retirement is the only way they can avoid poverty (or at least maintain their quality of life), especially with the possibility of a future government significantly cutting Social Security benefits.
Even those with retirement savings often treat their houses as an asset to be leveraged or sold at retirement to help fund the latter stages of their lives [2].
These are all good reasons to carry property insurance even if you don't have a mortgage on the property that requires it.
Say you buy a $800k prop but $400k is land value. Layer it is $1.6m of which $1m is land value. They can huff and puff and blow your uninsured house down, and you now have a $1m development lot.
Now clearly it is better to be insured, but insurance doesn’t always come through so this is a hedge.
Even if you don’t have a mortgage, your home is probably worth several times your annual salary. Most people can’t afford that loss if it burns down, gets hit by a tornado etc…