Home insurance is an important piece of protection that everyone who owns a house needs to carry. It’s there to protect you from any number hazards that might occur on the property. However, you might think that the risk might be less than the investment itself. Therefore, you might want to cancel your policy if you live in an older home that you have paid off. But don’t do it. There are a multitude of reasons why this is not a good idea.
Even though you might not have financing on your home anymore, that doesn’t mean you don’t have an investment in your property. Therefore, it’s imperative that you always carry home insurance.
Why am I required to have homeowners insurance?
When you buy a home, you might apply for a mortgage or other loan to finance the purchase. However, once a lender agrees to approve your loan, they will likely require you to buy homeowners insurance. You will likely have to carry this coverage for the duration of your loan.
The reason for this is because by agreeing to provide you with a loan, your mortgage lender will make an investment in the property, too. Therefore, should a problem occur and damage the home, the lender faces a risk of losing out on this investment.
By requiring you to carry coverage, they make sure that you have the financial ability to protect yourself from multiple hazards that might occur in your home. The loan itself won’t face a risk of default, and your own ability to recover from these accidents will be better assured.
Why should I keep my policy after I pay off my loan?
Even after you have paid off your home loan, that doesn’t mean you lose any of your own investment in the property. After all, you have spent years paying for your home, maintaining it and making it your sanctuary. That’s a lot of money that you could stand to lose if anything were to happen.
Think of the ramifications of a costly fire, break-in or severe weather event on your home. They could be devastating, not to mention extremely costly. Without the benefits of home insurance, you might have to attempt to pay for these losses out of pocket. You shouldn’t have to worry whether you can afford this. Instead, you should be able to rely on your home insurance to help you ease the burden.
Still, to get the most out of your homeowners benefits, you must have a policy that is tailored to you. That’s why it’s imperative to periodically review your benefits both during your mortgage term and after it ends. Don’t hesitate to reach out to your agent to review your plan and determine where to make adjustments that will always offer you optimized protection.
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