If you’ve made your last mortgage payment, congratulations! You no longer have the debt of a loan that you owe to someone else. Yet, even though you’re free from the mortgage payments, that doesn’t mean your responsibility toward your home decreases.
Getting rid of a loan might also free you from other cost burdens. For example, with the mortgage, you likely had to carry insurance as a requirement from the lender. However, once the mortgage is gone, the insurance requirements go away. As a result, you might not have to carry homeowner’s insurance any longer. That said, dropping your coverage is usually not a good idea.
Why Mortgage Lenders Require Insurance
Many lenders require homeowners insurance because it protects their investment in your property. Remember, it’s the lender’s money that you will use to buy the home. It is their money that you will eventually pay back with the mortgage. If something were to happen to the home, the lender would want to make sure they’d still get back the money they leant. An insurance claim might help settle the mortgage in the event of property loss or other major incidents.
Why You Should Keep Your Insurance Coverage
When you pay off your mortgage, the requirement to have insurance likely goes away. Still, this does not mean that you shouldn’t get rid of your homeowners insurance. Remember, you have an investment in your home. Therefore, you need to protect your own interest. Your policy can often still provide needed funds should a damaging event strike the home.
Adjusting Your Insurance After Closing the Mortgage
Once the mortgage is paid off, you likely have a lot more leeway with your homeowners insurance. The lender’s requirements might not reflect your unique needs. So, you might be able to change your policy accordingly.
First, make sure you do not owe any residual costs on the mortgage. This might include interest, fees, escrow payments or taxes. This can help ensure the bank has no ties to any insurance payments.
Finally, look at your limits. You might not need to carry the high limits your lender might have required. Your insurance agent can help you adjust your liability and structure coverage to better fit the value of your home. As a result, you might wind up saving money on your policy.
Home insurance is a necessary part of everyone’s budget. However, once you get coverage, that doesn’t mean you can’t adjust it later on. Once you no longer have a mortgage, take the time to fix your policy to better suit you.
Have questions about coverage post-mortgage
? Contact your insurance agent today. Our agents are happy to help!