For home insurance, usually it's a mortgage requirement, which is not by law. In condominiums, the community may require it of individual owners, and then it's not really law either.
It's completely insufficient, but it's not nothing. A reasonable person would carry much more insurance.
That said, that seems like a risky idea in a world full of LLCs, trusts, etc.
In either the bond, deposit, or liability insurance scenario, the responsible party remains on the hook for whatever is not covered in advance.
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.
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.
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.
Construction is pretty expensive too.
Home insurance isn't mandatory, but refinancing your mortgage is impossibile without one.
