When you have a mortgage loan on your house, your lender will require that you keep a sufficient amount of homeowner's insurance coverage on the house. As soon as you pay off the loan, you will no longer be required to follow the rules of your lender, which means you could cancel your home insurance policy. While you could do that, the big question is whether this is a good idea. Here are several things to consider as you make the decision to keep your policy or cancel it.
How would losing your home affect your finances?
The first thing to consider is how you would stand financially if you were to lose your home to a storm, fire, or anything else. If your home was completely destroyed and you were left with nothing, would you have enough cash to build a new house and replace everything you own? If so, would this cause you to have to spend your entire life savings? If replacing your house and all your things would cause financial hardship to you, getting rid of your home insurance would not be a good idea.
Do you have a way to pay for lawsuits that could potentially arise?
It's important to understand that home insurance is not just for protecting your things, but it is also for protecting yourself from accidents that happen to people that visit your home. This is called liability coverage, and it is a standard part of home insurance. For example, if your dog bit someone and the person sued you, your home insurance policy would most likely cover the damages you must pay. Without insurance, this money would have to come out of your pocket.
Is paying a small amount each year worth the protection?
The final thing to think about is the small amount of money it takes to protect your home with home insurance, especially if you take advantage of discounts that are available. Home insurance is very affordable, and it offers so much protection. Most people choose to keep their home insurance for this reason, even after paying off their mortgages.
Keeping home insurance on your house, even after it is paid off, is usually the best option. The price you will pay for coverage is very small compared to the amount you could lose if a fire consumed the entire structure and everything in it. Once your house is paid off, it might be worthwhile to change the coverage you have, though, and you can do this by contacting a home insurance office like Kuresman Insurance today.