MONDAY, JUNE 19, 2023
Paying off the mortgage to a home can feel like a huge accomplishment, as it should be. Your loan has been paid in full, the home is yours and you no longer have the bank holding a lien over your house. Unfortunately, not everything is cut and dry after you pay off your mortgage—including your home insurance.
Is Home Insurance Still Required if You Pay Off Your House?
Technically, the bank is the entity that requires you to have home insurance on your house. Once you no longer owe the bank for your home, that requirement goes away. There is also no federal law stating that you must carry home insurance. So technically, you are not required to carry home insurance once you’ve paid off your home. It’s still a good idea, however. Home insurance works to protect you financially in case of a disaster. If a storm sweeps away your home or a fire destroys your roof, you would be looking to pay for repair or rebuild out of pocket without a home insurance policy.
Keep in mind that home insurance also covers your personal belongings. It can help you replace items that are vandalized or stolen.
Notifying Your Insurer About Your Mortgage
Once you have officially paid off your mortgage, be sure to notify your insurance provider. They will no longer go through the bank. Instead, you will handle the bill directly. This means that you will have to set up your account so the insurer draws the premiums from your account rather than the lender’s.
You may not need the same limits of home insurance after you pay off your mortgage. The amount you carried before was in part to protect your lender from financial loss in case something happened to your home. Now that you are the sole owner, you can raise and lower your home insurance coverages as you see fit. Make sure that you still have enough coverage to make any repairs or replacements you would need in case of a disaster.
Is Home Insurance Cheaper on a House Without Mortgage?
Paying off your mortgage may not in itself have an affect on your home insurance premiums. The main difference is if you choose to adjust your policy after paying off your mortgage. Lower limits generally means lower premiums, but this also means less compensation for a claim.
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