Paid of Mortgage on home/need help with insurance

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Topic Author
4503
Posts: 23
Joined: Sun Apr 06, 2014 1:17 am

Paid of Mortgage on home/need help with insurance

Post by 4503 » Tue Jul 02, 2019 11:08 am

Hi All,

I recently paid of my mortgage and I am debt free. I have a good and secure job (for at least 5 - 10 years). Therefore, I plan to use a high savings and investment rate, instead of other approaches such as real estate. One of my goals is to never pay interest again. Therefore, I planned to downsize my home. However, my wife is not willing to move, unless up-sizing. Thus, I will be living in my current home for a long time.

I want to protect my home, current nest egg and the ability to continue to build wealth according to Boglehead philosophy. First, I want to protect my home because currently, I have health insurance at work with life and disability insurance. I will investigate how to improve on those fronts after I secure the home.

I am investigating the type of insurance I should buy, now that I own the home.

Below are some specs:
1. Bought for approximatley 170K
2. Current worth 184K (according to online site)
3. 3 bedroom and 3 baths
4. 2100 sqft
5. .47 acres

Any help would be greatly appreciated!

Thanks everybody!

Silk McCue
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Joined: Thu Feb 25, 2016 7:11 pm

Re: Paid of Mortgage on home/need help with insurance

Post by Silk McCue » Tue Jul 02, 2019 11:18 am

Please clarify. You have obviously had a homeowners policy in place while the house had a mortgage on it which should still be in force. Paying off the house should have impact on the coverage that you would keep.

What exactly are you asking about?

In general you may want to add an Umbrella Liability policy on top of all other coverage.

Cheers

runner3081
Posts: 3218
Joined: Mon Aug 22, 2016 3:22 pm

Re: Paid of Mortgage on home/need help with insurance

Post by runner3081 » Tue Jul 02, 2019 11:18 am

Umbrella?

Silk McCue
Posts: 4696
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Re: Paid of Mortgage on home/need help with insurance

Post by Silk McCue » Tue Jul 02, 2019 11:22 am

runner3081 wrote:
Tue Jul 02, 2019 11:18 am
Umbrella?
Lots of threads on this site for Umbrella Liability insurance. Google is your friend.

https://www.investopedia.com/terms/u/um ... policy.asp

Cheers

runner3081
Posts: 3218
Joined: Mon Aug 22, 2016 3:22 pm

Re: Paid of Mortgage on home/need help with insurance

Post by runner3081 » Tue Jul 02, 2019 11:58 am

Silk McCue wrote:
Tue Jul 02, 2019 11:22 am
runner3081 wrote:
Tue Jul 02, 2019 11:18 am
Umbrella?
Lots of threads on this site for Umbrella Liability insurance. Google is your friend.

https://www.investopedia.com/terms/u/um ... policy.asp

Cheers
I know fully what one is and have one, that was a response to the OP that he may need to look into umbrella coverage :)

Topic Author
4503
Posts: 23
Joined: Sun Apr 06, 2014 1:17 am

Re: Paid of Mortgage on home/need help with insurance

Post by 4503 » Tue Jul 02, 2019 8:55 pm

Thank you.

I have home insurance but no flood insurance. My home is not in a flood zone so I was not motivated to get it. Now that I outright own the home I should get it...i am thinking. If I do not have flood insurance, my home may get compromised and I will have to rent or fix it up. Thus compromising my ability to max investing. Another rational was that the cost is 500 per year for flood insurance. For 20 years, it would cost approx 10000. My goal is to hit 1 mil or more with my investments. Thus the total cost if flood insurance is approx 1% to protect reaching 1 mil or more. Therefore, I will get the flood insurance. Does that logic make sense? Unfortunately, I did not think about flood insurance like this until recently. I am worried I may of over looked something else I should insure for. I just need help protecting my home so that I can continue on my path. I really do not want to do anything else but invest safely. I have no interest in side hustles, so I have to make sure that my ability to invest is not compromised. Thanks!

Silk McCue wrote:
Tue Jul 02, 2019 11:18 am
Please clarify. You have obviously had a homeowners policy in place while the house had a mortgage on it which should still be in force. Paying off the house should have impact on the coverage that you would keep.

What exactly are you asking about?

In general you may want to add an Umbrella Liability policy on top of all other coverage.

Cheers

delamer
Posts: 10133
Joined: Tue Feb 08, 2011 6:13 pm

Re: Paid of Mortgage on home/need help with insurance

Post by delamer » Tue Jul 02, 2019 9:00 pm

4503 wrote:
Tue Jul 02, 2019 8:55 pm
Thank you.

I have home insurance but no flood insurance. My home is not in a flood zone so I was not motivated to get it. Now that I outright own the home I should get it...i am thinking. If I do not have flood insurance, my home may get compromised and I will have to rent or fix it up. Thus compromising my ability to max investing. Another rational was that the cost is 500 per year for flood insurance. For 20 years, it would cost approx 10000. My goal is to hit 1 mil or more with my investments. Thus the total cost if flood insurance is approx 1% to protect reaching 1 mil or more. Therefore, I will get the flood insurance. Does that logic make sense? Unfortunately, I did not think about flood insurance like this until recently. I am worried I may of over looked something else I should insure for. I just need help protecting my home so that I can continue on my path. I really do not want to do anything else but invest safely. I have no interest in side hustles, so I have to make sure that my ability to invest is not compromised. Thanks!

Silk McCue wrote:
Tue Jul 02, 2019 11:18 am
Please clarify. You have obviously had a homeowners policy in place while the house had a mortgage on it which should still be in force. Paying off the house should have impact on the coverage that you would keep.

What exactly are you asking about?

In general you may want to add an Umbrella Liability policy on top of all other coverage.

Cheers
You’d be better off reviewing your coverages under your homeowners’ than buying flood insurance that you don’t need.

For instance, make sure you have full coverage for rebuilding and that you are insured if you have a backup in your sewer line.

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willthrill81
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Location: USA

Re: Paid of Mortgage on home/need help with insurance

Post by willthrill81 » Tue Jul 02, 2019 9:01 pm

4503 wrote:
Tue Jul 02, 2019 8:55 pm
Thank you.

I have home insurance but no flood insurance. My home is not in a flood zone so I was not motivated to get it. Now that I outright own the home I should get it...i am thinking. If I do not have flood insurance, my home may get compromised and I will have to rent or fix it up. Thus compromising my ability to max investing. Another rational was that the cost is 500 per year for flood insurance. For 20 years, it would cost approx 10000. My goal is to hit 1 mil or more with my investments. Thus the total cost if flood insurance is approx 1% to protect reaching 1 mil or more. Therefore, I will get the flood insurance. Does that logic make sense? Unfortunately, I did not think about flood insurance like this until recently. I am worried I may of over looked something else I should insure for. I just need help protecting my home so that I can continue on my path. I really do not want to do anything else but invest safely. I have no interest in side hustles, so I have to make sure that my ability to invest is not compromised. Thanks!
IMO, there's little to no point in you getting flood insurance if your lender did not require it. Have you verified that your property is eligible for flood insurance? I believe that there is only one flood insurance rating where you can get the insurance but lenders do not require it.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Topic Author
4503
Posts: 23
Joined: Sun Apr 06, 2014 1:17 am

Re: Paid of Mortgage on home/need help with insurance

Post by 4503 » Tue Jul 02, 2019 9:07 pm

Thank you for the Umbrella Liability policy idea. I did not know about this. I will look into this ASAP.

Silk McCue wrote:
Tue Jul 02, 2019 11:22 am
runner3081 wrote:
Tue Jul 02, 2019 11:18 am
Umbrella?
Lots of threads on this site for Umbrella Liability insurance. Google is your friend.

https://www.investopedia.com/terms/u/um ... policy.asp

Cheers

Silk McCue
Posts: 4696
Joined: Thu Feb 25, 2016 7:11 pm

Re: Paid of Mortgage on home/need help with insurance

Post by Silk McCue » Wed Jul 03, 2019 5:08 am

4503 wrote:
Tue Jul 02, 2019 8:55 pm
Thank you.

I have home insurance but no flood insurance. My home is not in a flood zone so I was not motivated to get it.
I live in Florida and have never lived in a flood zone. I have also never purchased flood insurance. My homeowners does cover backup of sewer line.

Cheers

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CAsage
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Re: Paid of Mortgage on home/need help with insurance

Post by CAsage » Wed Jul 03, 2019 5:38 am

4503 wrote:
Tue Jul 02, 2019 8:55 pm

My home is not in a flood zone ... If I do not have flood insurance, my home may get compromised and I will have to rent or fix it up. Thus compromising my ability to max investing. Another rational was that the cost is 500 per year for flood insurance. For 20 years, it would cost approx 10000. My goal is to hit 1 mil or more with my investments. Thus the total cost if flood insurance is approx 1% to protect reaching 1 mil or more.
First, you should determine for yourself whether a flood is a real possibility on your street. Many neighborhoods in the USA are not in flood zones, but manage to get flooded due to 1000 year storms hitting more often. Flood maps can be incomplete or outdated. If you really are in a flood zone (low elevation, near river, etc), then the insurance price is actually protecting you only on the value of the house itself, or the repairs (i.e. house not land value). So that is not a percentage of your goal net worth; you are only protecting the house. For 20 years, it's more like 10% of the house price, and it will go up each year. Rethink living in a flood zone if you want to save money..
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

notmyhand
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Re: Paid of Mortgage on home/need help with insurance

Post by notmyhand » Wed Jul 03, 2019 9:15 am

Mine subsidence insurance if coal mines are or were prevalent in the area.

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Watty
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Re: Paid of Mortgage on home/need help with insurance

Post by Watty » Wed Jul 03, 2019 9:51 am

You might consider if getting earthquake insurance would be a good idea. A lot of areas outside of California have more earthquake risk than you might assume. I am in Atlanta where there is a lowish amount of risk and I have it since it only costs around $100 a year.

https://earthquake.usgs.gov/hazards/learn/

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cshell2
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Re: Paid of Mortgage on home/need help with insurance

Post by cshell2 » Wed Jul 03, 2019 6:46 pm

I'm confused as to why homeowners insurance needs change once its paid off? I guess I can see some people reducing coverage if they feel comfortable with the added risk as a the lender no longer requires it but why would you start adding things you didn't have before?

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JoeRetire
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Re: Paid of Mortgage on home/need help with insurance

Post by JoeRetire » Wed Jul 03, 2019 6:57 pm

4503 wrote:
Tue Jul 02, 2019 11:08 am
I am investigating the type of insurance I should buy, now that I own the home.
Buy the same insurance you bought when you held a mortgage.

Having a paid off mortgage doesn't change the value of the house, nor the cost to replace it. Nothing has changed in this regard.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

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willthrill81
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Re: Paid of Mortgage on home/need help with insurance

Post by willthrill81 » Wed Jul 03, 2019 7:21 pm

cshell2 wrote:
Wed Jul 03, 2019 6:46 pm
I'm confused as to why homeowners insurance needs change once its paid off? I guess I can see some people reducing coverage if they feel comfortable with the added risk as a the lender no longer requires it but why would you start adding things you didn't have before?
It doesn't necessarily need to. However, we'll possibly change one aspect of our coverage. Once our mortgage is paid off, we'll strongly consider raising our deductible beyond what our lender allows, which is a measly $1k.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

CppCoder
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Re: Paid of Mortgage on home/need help with insurance

Post by CppCoder » Wed Jul 03, 2019 8:07 pm

Flood insurance necessity is really a matter of location. People not recommending flood insurance because you live in Zone X clearly don't live in a flood prone area, like, say, Houston. Ask anyone who lived in Zone X whose house flooded during Hurricane Harvey if you should carry flood insurance. You never know when the Army Corps of Engineers will simply decide that you are acceptable collateral damage when your city receives 55 inches of rain over five days :shock:. Zone X coverage is cheap, and flood damage is horribly expensive, but know your area beyond the flood maps.

retiredflyboy
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Re: Paid of Mortgage on home/need help with insurance

Post by retiredflyboy » Thu Jul 04, 2019 8:37 am

Review your current coverages on auto and house bringing them up to the point where umbrella coverage sets on top of and takes over. Don’t text and drive and don’t drink and drive.
Facts are stubborn things. Everything works until it doesn’t.

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