Should I Keep Home Insurance on My Paid Off Home?

It’s a happy day when the home mortgage is finally paid off. Those big monthly payments are over, right? But there is one very important thing to remember if your home insurance payments were rolled into those large mortgage payments: You need to continue home insurance coverage; it is too important to lose. If insurance was part of the mortgage, as is normally required by many mortgage lenders, the insurance coverage will automatically be terminated soon after the final payment is made. Your home and its contents will no longer be insured, and you may also lose liability insurance that was included in that policy.

Here’s what to do shortly before the home is paid off:

1. Contact your insurance agent to arrange for continuation of all insurance policies for the home, contents and liability. Insure for the cost of rebuilding, not market value.
2. Make sure your new policies begin at the same time the old one terminates.
3. If you want to save money on premiums, switch to a large deductible. This is much better than trying to go without insurance on your property.
4. Be sure you receive discounts for applicable improvements, such as smoke alarms, dead-bolt locks, sprinkler systems, and so forth. If you belong to a fraternal organization, there may also be a discount available. If you insure vehicles and your home with the same company, a discount for multiple policies may apply.

Protect yourself and your paid-off home by continuing insurance coverage on the buildings, contents, and outbuildings and include a comprehensive policy. Comprehensive insurance covers damage from natural disasters like fire, lightning, hail, ice, falling trees, explosions, earthquake, vandalism and other situations. Liability insurance is a must to avoid expensive legal situations that evolve if someone slips and falls on your property or is otherwise injured. Consult with your agent for exact recommendations.