Homeowner insurance is not required if you have paid your home off entirely.
However, it is strongly encouraged that you keep your current homeowner insurance policy or switch to an insurance provider that can better match your insurance needs now that your home is paid off.
The following review discusses why you should keep your homeowner insurance policy and the risks of dropping your policy once your home is completely paid off.
Why You Should Keep Your Homeowner Insurance Policy
A common misconception is that homeowners can prevent making insurance claims by taking extra caution and subsequently do not need an insurance policy once their home is fully paid off.
However, while safety precautions are always a good idea, home insurance claims are sometimes necessary, and the lack of a homeowners insurance policy can leave you vulnerable to incredibly high out-of-pocket costs and handling difficult processes, such as repairing a home or paying legal fees.
What Does a Homeowner Insurance Policy Include
It is helpful to understand what exactly your homeowner insurance policy includes to determine whether or not you should keep it.
Of course, every policy is unique, and you can customize your homeowner insurance policy to fit your needs. However, the standard homeowner insurance policy covers:
- Damage to your home exterior
- Everything inside your home
- Medical costs of your guests
- Legal costs from neighbors
- Relocation expenses
Through a quick cost assessment, you can see that homeowner insurance protects you from potentially crippling costs.
From a tree falling on your roof to a break-in and burglary while you are on vacation, there are numerous incidents that could occur despite efforts to prevent them.
The Risks of Not Having Homeowners Insurance
Every homeowner should assess the risks of not having homeowner insurance to the best of their ability. Several common risks homeowners have if they were to drop their homeowner insurance policy include a complicated home selling process and increased vulnerability to natural disasters, burglary and lawsuits.
You Are Vulnerable to Natural Disasters
You can reduce the risk of making an insurance claim by installing a new roof, taking precautions to ensure a fire does not spread in your home, etc. However, some natural disasters can damage even the most damage-resistant homes.
A natural disaster that damages the home’s exterior can be expensive to repair or replace, and the homeowner is responsible for the full cost if they do not have a homeowner insurance policy.
It Can Complicate the Home Selling Process
Many selling agents are hesitant to work with home sellers that do not have homeowner insurance, and many prospective buyers are less willing to make an offer.
This is because any upgrades the home needs to complete a sale may not be able to get done in a timely manner as the seller is responsible for the costs out of their own pocket.
In addition, if something were to occur to the home after an offer is accepted and before the home closing, then the deal is far less likely to be completed as the home seller is responsible for the repair and replacement costs
You Do Not Have Protection From Break-Ins and Burglary
If you do a walk-through of your home and count up the cost of all of the valuables, you can quickly see how vulnerable you could be without a homeowner insurance policy.
A home security system is a great way to protect yourself from break-ins and burglary, but it is not 100 percent effective in preventing it.
A insurance policy covers you if a burglar were to damage your property or steal your personal belongings during a break-in. Of course, you can still install a home security system, which could lower your home insurance premium by a fair amount.
High Out-of-Pocket Legal Fees If You Get Sued
If something were to occur on your property that resulted in the injury or illness of a neighbor or guest, then you could potentially be sued. A standard homeowner insurance policy covers much of the legal fees related to certain lawsuits.
Without an insurance policy, then you might have to pay the legal fees (i.e. attorney fees, settlement costs) out of your own pocket. While this may seem like an unlikely scenario, life is often unpredictable.
If you have frequent guests that visit, or a pet that could potentially bite a neighbor or other risks, then you should strongly consider keeping your homeowner insurance policy after your home is paid off.
Merchant Family Agency Offers Homeowner Insurance
You can contact Merchant Family Agency by phone or message to learn more about the importance and benefits of insurance after you have paid off your home.
We offer personalized insurance policies to ensure you are adequately protected financially if anything unforeseen were to occur to your home.