Should You Cancel Your Homeowner's Insurance After Paying Off Your Mortgage?
You probably know that if you have a mortgage on your house, your lender will require that you carry homeowner's insurance on the house. This is a standard requirement by all lenders, but the requirement is no longer valid once you make the last payment on your mortgage loan. At this time, you might wonder if you should cancel your homeowner's policy because you no longer are required to have it. If you are wondering this, here are a few things to consider before you cancel the policy.
Canceling the policy would cancel your coverage
If you cancel your homeowner's insurance policy and experience a fire that destroys your entire home, do you realize that you would have no coverage for the house? This means that you would have to repay the entire amount to have the house rebuilt, and this might mean taking out a loan for the entire cost of the house.
Before you cancel your homeowner's insurance policy, you should thoroughly think about this. Without home insurance, you are taking a huge risk that could be a very costly mistake if anything happens to your home.
Increasing the deductible is a better option
If you are considering canceling your homeowner's insurance policy, it is most likely to reduce your monthly expenses. Cancelling your policy would provide a way to reduce your expenses, but it would also eliminate all the coverage you have on your home.
A better option than cancelling your policy is to consider keeping the policy but increasing the deductible on it. If you currently have a $1,000 deductible, raising it to $5,000 would probably cause a major decrease in your premiums.
The benefit of this option is that you would still have the same types and amounts of coverage for your home. The downside is that you would have to pay more money if you ever filed a claim. Keep in mind, though, that if you no longer have a mortgage payment to make on your home, you might have a lot more cash on hand to spend. This means you could probably afford to pay a $5,000 deductible if you ever filed a claim.
Having homeowner's insurance is a vital part of life if you own a house, even if you no longer have a loan on it. If you have questions about your policy or would like to get quotes for a new policy, contact a homeowner's insurance company today.