We paid off our mortgage- Do we need still need homeowners insurance?
Absolutely. One of the biggest mistakes a homeowner can make is dropping their homeowners insurance simply because their lender no longer requires it. Let’s look at it this way….
Does paying off your mortgage make your home any less susceptible to damage or claims?
Of course not. A hail storm is not going to bypass your home just because your mortgage is paid off. Remember, homeowners insurance is designed to protect the financial investment you have in your home. When you have a mortgage, your lender owns part of your home and homeowners insurance protects their financial investment in your house (hence why it is required). When you pay off your loan in it’s entirety, homeowners insurance protects your financial investment.
Some homeowners might feel it’s worth taking the risk to drop their homeowners insurance. Especially if they have been lucky enough to go a few years without ever having to make a claim. However, as any homeowner who has lost their home will attest to- you never know exactly when or where a natural disaster is going to hit.
Also, even if you felt confident that your home was safe from any chance of damage, consider the liability portion of your homeowners insurance that protects you and your family from the financial impact of lawsuits. In the event that you are presented with a lawsuit from an injury or wrongdoing that occurs on your property, how are you going to afford the legal costs?
The liability portion of your homeowners insurance would be invaluable in that scenario.
If the cost of homeowners insurance is what is driving your consideration to drop your policy, consider other options for saving on your premium. For example, if you feel you can afford a higher deductible in the event of a claim, consider raising your deductible to lower your premium. Or, now that your mortgage is paid off, invest in a security system that could save you up to 15% on your homeowners insurance policy. Upgrading your home and it’s safety systems is an easy way to save on homeowners insurance without increasing your financial risk.