Your home loan lender requires a certain amount and type of homeowners insurance. However, if you've already paid off your home or paid cash, then you might think you don't need insurance. There are solid reasons why you should continue with your homeowners insurance even if you don't have a lien on your home. Here are some reasons to keep your home insurance after your loan is paid off and what changes you may want to make to an existing policy.
Reasons to Keep Your Insurance
Before you drop or reduce your homeowners insurance, consider all the protections you have under your policy. Here are some of the things insurance provides.
It Protects You From Total Loss
Your homeowner's policy protects you from the total loss of your investment. Most policies cover home losses from natural and man-made disasters.
It Protects You From Damage
Insurance covers your home if it is partially damaged by events like fires or storms.
It Protects You From Lawsuits
You will have coverage if your dog bites a visitor or when someone is injured on your property.
It Protects Your Belongings
The things inside your home or own your property are protected from loss, damage, and theft.
It Protects Your Other Structures
Some policies also cover detached garages, sheds, and other outbuildings.
Changes You Should Consider With Existing Insurance
After you sign all the papers and are completely done with your mortgage, consider making a few changes to your policy. Fortunately, you will have more flexibility when you don't have a lienholder. Here are three things you should do soon after the end of your mortgage is finalized.
Remove the Lien Holder
Ensure the lender is not listed on your policy. If you don't, then any claims you make on your policy may be slowed down and payments delayed.
Look at Your Coverage Limits
Your home may have gone up in value, or you may have obtained more valuable possessions. Make sure you have enough coverage for your losses.
Raise Your Deductible to Save Money
If you want to save on your monthly premiums, then raise your deductible. Raise it up to the amount you can afford to pay out of pocket if you suffer a loss.
Even if you aren't required to have homeowners insurance, you should still have it. Your home is a huge financial and emotional investment. Being properly insured protects you from a variety of perils. If you have already paid off your home, or you want to make changes to your policy, contact your home insurance provider for help.