Anyone own a home and drop insurance coverage after mortgage paid off?

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WarChest
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Anyone own a home and drop insurance coverage after mortgage paid off?

Post by WarChest » Sat Sep 23, 2017 3:36 pm

Wondering if anyone here has experience (positive or negative) with getting rid of their homeowners policy completely after they paid off their mortgage. Does it make sense to essentially self insure if one can afford it?

The vast majority of the value of my property is in the land. I have to pay homeowners insurance per the mortgage requiring it, but I just don't see a point given the land vs structure value differential. Wondering if dropping insurance is an extra reason to pay off the mortgage.

denovo
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by denovo » Sat Sep 23, 2017 3:41 pm

WarChest wrote:
Sat Sep 23, 2017 3:36 pm
Wondering if anyone here has experience (positive or negative) with getting rid of their homeowners policy completely after they paid off their mortgage. Does it make sense to essentially self insure if one can afford it?

The vast majority of the value of my property is in the land. I have to pay homeowners insurance per the mortgage requiring it, but I just don't see a point given the land vs structure value differential. Wondering if dropping insurance is an extra reason to pay off the mortgage.
No, horrible idea. First of all, your "A" Coverage if you get replacement cost coverage, is the cost to rebuild. How many SF is your house?

WarChest
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by WarChest » Sat Sep 23, 2017 3:46 pm

House is 1500 sq ft and while livable, I would call it a pretty good remodel or even full tear down candidate. We will likely seek to do a major remodel sometime in the next handful of years. Insurance has the structure value at like $275k. I would call the land value $1.2mm or a bit more.

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willthrill81
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by willthrill81 » Sat Sep 23, 2017 3:51 pm

denovo wrote:
Sat Sep 23, 2017 3:41 pm
WarChest wrote:
Sat Sep 23, 2017 3:36 pm
Wondering if anyone here has experience (positive or negative) with getting rid of their homeowners policy completely after they paid off their mortgage. Does it make sense to essentially self insure if one can afford it?

The vast majority of the value of my property is in the land. I have to pay homeowners insurance per the mortgage requiring it, but I just don't see a point given the land vs structure value differential. Wondering if dropping insurance is an extra reason to pay off the mortgage.
No, horrible idea. First of all, your "A" Coverage if you get replacement cost coverage, is the cost to rebuild. How many SF is your house?
I wouldn't unequivocally call it a "horrible idea." Some people have the means to self-insure. If your home comprises 5% or less of your net worth, for instance, then who cares if it burns to the ground or gets swept away in a tornado? You can easily replace it.

Remember that the real purpose of insurance should be to only insure against potential losses that would be financially detrimental to you if they occurred.

That being said, it's the fairly rare person, even on this forum, who would not consider the loss of their home to be financially detrimental. I seem to recall that when Thomas Stanley examined American millionaires, their homes represented, on average, something like 20% or more of their net worth. It makes a lot of sense to insure such a large proportion of one's assets.
“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

TheHouse7
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by TheHouse7 » Sat Sep 23, 2017 3:55 pm

willthrill81 wrote:
Sat Sep 23, 2017 3:51 pm
denovo wrote:
Sat Sep 23, 2017 3:41 pm
WarChest wrote:
Sat Sep 23, 2017 3:36 pm
Wondering if anyone here has experience (positive or negative) with getting rid of their homeowners policy completely after they paid off their mortgage. Does it make sense to essentially self insure if one can afford it?

The vast majority of the value of my property is in the land. I have to pay homeowners insurance per the mortgage requiring it, but I just don't see a point given the land vs structure value differential. Wondering if dropping insurance is an extra reason to pay off the mortgage.
No, horrible idea. First of all, your "A" Coverage if you get replacement cost coverage, is the cost to rebuild. How many SF is your house?
I wouldn't unequivocally call it a "horrible idea." Some people have the means to self-insure. If your home comprises 5% or less of your net worth, for instance, then who cares if it burns to the ground or gets swept away in a tornado? You can easily replace it.

Remember that the real purpose of insurance should be to only insure against potential losses that would be financially detrimental to you if they occurred.

That being said, it's the fairly rare person, even on this forum, who would not consider the loss of their home to be financially detrimental. I seem to recall that when Thomas Stanley examined American millionaires, their homes represented, on average, something like 20% or more of their net worth. It makes a lot of sense to insure such a large proportion of one's assets.
I would add that those few people that could afford to self insure would rather pay $500 a year than risk 250k of capital to replace it.

Same goes for cheap life/car insurance.
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

sport
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by sport » Sat Sep 23, 2017 3:59 pm

Homeowners insurance also includes liability insurance.

Admiral
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Admiral » Sat Sep 23, 2017 3:59 pm

Think of it this way: You're "investing" the $2k per year or whatever you pay to insure the home so you don't have to keep the capital on hand to either rebuild the home or pay for a new place to live if it burns to the ground. Even if your home is worth $50k, that strikes me as a smart bet. Otherwise you better have that $50k or whatever sitting in your mattress, in a bank account, or in TIPS, ready to deploy if something happens to your house. I'd rather invest that money in the markets.

And most homes are worth more than 50k. I think the average is over $150k.

runner3081
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by runner3081 » Sat Sep 23, 2017 4:03 pm

sport wrote:
Sat Sep 23, 2017 3:59 pm
Homeowners insurance also includes liability insurance.
This is why I would never drop it. You have to have some kind of liability coverage on the property. Kid walks up the driveway and breaks his leg on Halloween falling a lifted walkway or similar/worse? Good luck funding that on your own. You would even have to find your own lawyer, wouldn't be any insurance companies fighting for you.

gks
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by gks » Sat Sep 23, 2017 4:14 pm

WarChest,

First, I don't know what state you live in, but paying insurance on 1.475mm is a little out there. You only have to insure 275k for house replacement, since if the home burns down, the land is still there. Now, if you are in California, maybe earthquake insurance may be helpful if CA slides into the Pacific. (bad attempt at humor)

Something not yet brought up is the liability part of homeowner's insurance. Do you want to face a civil suit by yourself without an insurance company lawyer if someone slips, falls, breaks an elbow, knee, ankle, or, name your favorite fracture, on your property? IMHO, this part of homeowner's insurance is invaluable.

Greg

P.S. While typing this, there have been a couple of other responses about liability insurance. Sorry if it is redundant.

G

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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by neilpilot » Sat Sep 23, 2017 4:17 pm

Have you considered liability-only insurance on your home. Talk to your agent or others, since this is an option. I consider renter's insurance (HO-4) a form of liability-only home insurance. HO-4 is essentially a homeowner's policy, but without Coverage A (dwelling) coverage.

MP123
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by MP123 » Sat Sep 23, 2017 4:28 pm

With what sounds like a $1.5 million paid off asset you probably want an umbrella insurance policy in addition to your homeowners to cover your liability. Or perhaps it's protected by homestead exemptions in your state?

I would not drop the HO for sure.

WarChest
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by WarChest » Sat Sep 23, 2017 4:44 pm

So I guess what's important to note is that we are fairly sure we will do a major remodel/demo in the next handful of years. So if the place burns down then oh well, we'll accelerate the timeline.

As for liability, people mention that and I guess I kinda agree. But I have my doubts as to how reasonable it is to be worried about that. I think it is so unlikely that I would ever run into anything that I'm basically willing to go without coverage. I also don't have umbrella...

Maybe I should start a new thread called "has anyone actually used their liability coverage from homeowners policy?"

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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by sailaway » Sat Sep 23, 2017 4:46 pm

WarChest wrote:
Sat Sep 23, 2017 4:44 pm
So I guess what's important to note is that we are fairly sure we will do a major remodel/demo in the next handful of years. So if the place burns down then oh well, we'll accelerate the timeline.

As for liability, people mention that and I guess I kinda agree. But I have my doubts as to how reasonable it is to be worried about that. I think it is so unlikely that I would ever run into anything that I'm basically willing to go without coverage. I also don't have umbrella...

Maybe I should start a new thread called "has anyone actually used their liability coverage from homeowners policy?"
Didn't we already have one of those this week?

WarChest
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by WarChest » Sat Sep 23, 2017 4:50 pm

yeah it was for umbrella though.

BarbK
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by BarbK » Sat Sep 23, 2017 4:57 pm

I live on the east coast in Florida and a lot of my neighbors have dropped their home insurance over the years. I have looked into it, but went with a 10% hurricane deductible instead (4 years now). You can get liability only insurance for about $300 per year, but the last time I looked for a HO policy (2014) with a 2% hurricane deductible (the minimum), it was 16K per year and that is still with a 14K hurricane deductible. I still pay an insane amount for what amounts to Fire Insurance plus I get $1600 credit per year for hurricane shutters on all windows/door. I would need 70K of hurricane damage before the insurance company paid out a dime. I have never had a claim.

My husband has wanted to go 'bare' (Liability only) for years, so the 10% hurricane deductible was a compromise. Depending on the rate increase after Irma, I may drop HO altogether. My policy is up for renewal in January.

We have few companies that will even insure us and we have no option for lowering the amount of coverage. I also think they include the land value in the premium.

Nearly A Moose
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Nearly A Moose » Sat Sep 23, 2017 6:01 pm

WarChest wrote:
Sat Sep 23, 2017 4:44 pm
So I guess what's important to note is that we are fairly sure we will do a major remodel/demo in the next handful of years. So if the place burns down then oh well, we'll accelerate the timeline.

As for liability, people mention that and I guess I kinda agree. But I have my doubts as to how reasonable it is to be worried about that. I think it is so unlikely that I would ever run into anything that I'm basically willing to go without coverage. I also don't have umbrella...

Maybe I should start a new thread called "has anyone actually used their liability coverage from homeowners policy?"
Lawyer here. I don't do personal injury or property law, but I have a sense of the field. I'd strongly suggest an umbrella policy and HO policy is in your interest. (you usually need HO to get umbrella I think). It only takes one incident to bankrupt someone. It's a low likelihood, high consequence scenario - exactly what insurance is for.
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

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willthrill81
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by willthrill81 » Sat Sep 23, 2017 6:02 pm

TheHouse7 wrote:
Sat Sep 23, 2017 3:55 pm
willthrill81 wrote:
Sat Sep 23, 2017 3:51 pm
denovo wrote:
Sat Sep 23, 2017 3:41 pm
WarChest wrote:
Sat Sep 23, 2017 3:36 pm
Wondering if anyone here has experience (positive or negative) with getting rid of their homeowners policy completely after they paid off their mortgage. Does it make sense to essentially self insure if one can afford it?

The vast majority of the value of my property is in the land. I have to pay homeowners insurance per the mortgage requiring it, but I just don't see a point given the land vs structure value differential. Wondering if dropping insurance is an extra reason to pay off the mortgage.
No, horrible idea. First of all, your "A" Coverage if you get replacement cost coverage, is the cost to rebuild. How many SF is your house?
I wouldn't unequivocally call it a "horrible idea." Some people have the means to self-insure. If your home comprises 5% or less of your net worth, for instance, then who cares if it burns to the ground or gets swept away in a tornado? You can easily replace it.

Remember that the real purpose of insurance should be to only insure against potential losses that would be financially detrimental to you if they occurred.

That being said, it's the fairly rare person, even on this forum, who would not consider the loss of their home to be financially detrimental. I seem to recall that when Thomas Stanley examined American millionaires, their homes represented, on average, something like 20% or more of their net worth. It makes a lot of sense to insure such a large proportion of one's assets.
I would add that those few people that could afford to self insure would rather pay $500 a year than risk 250k of capital to replace it.

Same goes for cheap life/car insurance.
If you can handle the risk, it's financially a better decision to self-insure when feasible. If it wasn't, insurance companies would go out of business rather quickly.
“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

NotWhoYouThink
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by NotWhoYouThink » Sat Sep 23, 2017 6:05 pm

It's a low likelihood, high consequence scenario - exactly what insurance is for.

+100

Admiral
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Admiral » Sat Sep 23, 2017 6:21 pm

willthrill81 wrote:
Sat Sep 23, 2017 6:02 pm
TheHouse7 wrote:
Sat Sep 23, 2017 3:55 pm
willthrill81 wrote:
Sat Sep 23, 2017 3:51 pm
denovo wrote:
Sat Sep 23, 2017 3:41 pm
WarChest wrote:
Sat Sep 23, 2017 3:36 pm
Wondering if anyone here has experience (positive or negative) with getting rid of their homeowners policy completely after they paid off their mortgage. Does it make sense to essentially self insure if one can afford it?

The vast majority of the value of my property is in the land. I have to pay homeowners insurance per the mortgage requiring it, but I just don't see a point given the land vs structure value differential. Wondering if dropping insurance is an extra reason to pay off the mortgage.
No, horrible idea. First of all, your "A" Coverage if you get replacement cost coverage, is the cost to rebuild. How many SF is your house?
I wouldn't unequivocally call it a "horrible idea." Some people have the means to self-insure. If your home comprises 5% or less of your net worth, for instance, then who cares if it burns to the ground or gets swept away in a tornado? You can easily replace it.

Remember that the real purpose of insurance should be to only insure against potential losses that would be financially detrimental to you if they occurred.

That being said, it's the fairly rare person, even on this forum, who would not consider the loss of their home to be financially detrimental. I seem to recall that when Thomas Stanley examined American millionaires, their homes represented, on average, something like 20% or more of their net worth. It makes a lot of sense to insure such a large proportion of one's assets.
I would add that those few people that could afford to self insure would rather pay $500 a year than risk 250k of capital to replace it.

Same goes for cheap life/car insurance.
If you can handle the risk, it's financially a better decision to self-insure when feasible. If it wasn't, insurance companies would go out of business rather quickly.
And your evidence is...? I would argue that multimillionaires who can afford to pay out of pocket are precisely the ones who can also easily afford the insurance premium (as someone noted upthread).

Nate79
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Nate79 » Sat Sep 23, 2017 6:45 pm

Our cost of insurance is so small compared to the rebuild cost it would be absolutely crazy to drop it. In addition I would only self insure if I could pay the cost of replacement without batting an eye. I would need to be significantly wealthy before that is ever true. It's not even a close call.

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FIREchief
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by FIREchief » Sat Sep 23, 2017 6:45 pm

Perhaps already alluded to by others. If you no longer have a mortgage provider dictating a maximum deductible, you may be able to increase your deductible significantly and greatly reduce your annual premiums while still retaining liability coverage.
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englishgirl
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by englishgirl » Sat Sep 23, 2017 6:51 pm

We did not have the spare cash lying around to replace the roof if needed, or to completely rebuild. So we kept insurance. But I found a lower cost plan specifically for people without mortgages that is a "named perils" coverage and excludes certain things like theft. So that might be something that is available to you.
Sarah

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willthrill81
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by willthrill81 » Sat Sep 23, 2017 7:40 pm

Admiral wrote:
Sat Sep 23, 2017 6:21 pm
willthrill81 wrote:
Sat Sep 23, 2017 6:02 pm
TheHouse7 wrote:
Sat Sep 23, 2017 3:55 pm
willthrill81 wrote:
Sat Sep 23, 2017 3:51 pm
denovo wrote:
Sat Sep 23, 2017 3:41 pm


No, horrible idea. First of all, your "A" Coverage if you get replacement cost coverage, is the cost to rebuild. How many SF is your house?
I wouldn't unequivocally call it a "horrible idea." Some people have the means to self-insure. If your home comprises 5% or less of your net worth, for instance, then who cares if it burns to the ground or gets swept away in a tornado? You can easily replace it.

Remember that the real purpose of insurance should be to only insure against potential losses that would be financially detrimental to you if they occurred.

That being said, it's the fairly rare person, even on this forum, who would not consider the loss of their home to be financially detrimental. I seem to recall that when Thomas Stanley examined American millionaires, their homes represented, on average, something like 20% or more of their net worth. It makes a lot of sense to insure such a large proportion of one's assets.
I would add that those few people that could afford to self insure would rather pay $500 a year than risk 250k of capital to replace it.

Same goes for cheap life/car insurance.
If you can handle the risk, it's financially a better decision to self-insure when feasible. If it wasn't, insurance companies would go out of business rather quickly.
And your evidence is...? I would argue that multimillionaires who can afford to pay out of pocket are precisely the ones who can also easily afford the insurance premium (as someone noted upthread).
There is no free lunch when buying insurance. This is true regardless of the amounts involved. It's not going to hurt a multi-millionaire to burn $1,000, but that doesn't make it a wise decision.

I'll lay it out mathematically. If there was a 1% chance of an event occurring, and its occurrence would result in your losing $100, then your expected loss is $1. Obviously, you'll either lose $0 or $100, but the expected loss is $1. An insurance company must charge you more than $1 to insure this risk due to administrative expenses, profit, etc. How much more is a bit of a mystery to most of us because insurance actuaries don't release much of their data to the public. But the cost of the insurance will, aside from an a glaring actuary mistake, always be higher than the expected loss.

So if you can afford the loss (i.e. it will not be detrimental to your finances if it occurs), then it virtually always makes financial sense to self-insure. For this reason, buying insurance on small items like phones is a bad decision. You're playing a kind of lottery where the odds are stacked against you; you might win sometimes, but over the long-run, you will lose.

I'm not opposed to insurance at all; I think that many Americans are inadequately insured against very real and serious risks (i.e. disability, life). And most people should absolutely have HO insurance. But it's simply unnecessary for some.

Here's an interesting website I just found where a guy breaks down the risk of losing your home in a fire. It's completely anecdoctal, but between my wife and me, we don't personally know anyone who's had their home completely destroyed. And the average American supposedly knows about 2,000 people.
Last edited by willthrill81 on Sat Sep 23, 2017 9:48 pm, edited 1 time in total.
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calliecake47
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by calliecake47 » Sat Sep 23, 2017 7:51 pm

I just recently got a quote of around $2000 for a 2500sf home on a canal in Cocoa Beach. I don't remember what the deductible was but it wasn't anything unreasonable. Are you in a flood zone?

furikake
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by furikake » Sat Sep 23, 2017 8:01 pm

Last year we had a couple of bad hail storms, causing $67k of damage to our house. I was glad we had insurance even though we paid cash for our house. I'd rather pay the insurance premium instead of shelling out $67k all at once for the repairs. We would not go without homeowners insurance even though we have no mortgage.

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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Kevin M » Sat Sep 23, 2017 8:13 pm

I dropped flood insurance when I paid off my mortgage, but not homeowners.

The liability portion is important. Mine actually paid off to the tune of about $50K plus court costs for an incident involving my son. I was with a different insurance company when the incident ended up in court, but the previous insurance company was very honorable about covering this.

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Watty
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Watty » Sat Sep 23, 2017 8:17 pm

One thing to keep in mind is that when you have homeowners insurance the insurance company will also provide the lawyers.

For liability without homeowners insurance or an umbrella policy if you are sued then the cost to hire a lawyer could be considerable additional cost and even picking out a good lawyer could be difficult. If you are 80 and less mentally capable then it might be hard to handle dealing with a lawsuit yourself.

Even for damage to your house it might be necessary to sue someone if they cause damage to your house. For example if an electrician installs something incorrectly and your house burns down you might need to sue them.

curmudgeon
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by curmudgeon » Sat Sep 23, 2017 8:26 pm

I am considering dropping coverage. But I would want to keep liability coverage (required for my umbrella coverage). Land is probably 75% of my home value, though if you count rebuilding cost, it might be more like 65%. One thing to keep in the back of your mind is that there might be various tax consequences if you had to rebuild and pay out of tax-deferred funds (I'm not familiar with the ability or limitations in deducting the catastrophic loss to match up against IRA withdrawal or cap gains).

If we were planning to stay in this house another 25 years, I would give serious thought to doing a tear-down and rebuild in any case, so the structure is well-depreciated in my mind. I haven't personally known anyone with a major fire loss, but I have known folks with liability claims covered by their homeowners insurance. In my mind, a good portion of what I'm paying in homeowners insurance is going for paying claims that I personally wouldn't be likely to make (things like waiting for a windstorm to blow over their rotten fence and claiming it on insurance, rather than repairing or replacing it as part of normal maintenance).

Yooper16
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Yooper16 » Sat Sep 23, 2017 8:26 pm

Most homeowners policy are also what covers your personal possessions. If your house burns down, so does your furniture, clothes electronics etc. Without an appropriate coverage for those items you are up the creek.

Jags4186
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Jags4186 » Sat Sep 23, 2017 9:08 pm

It would seem to me you would want insurance not only for the potential financial loss, but also the assistance of the insurance company in dealing with the loss if one should occur.

Sure maybe you could afford the loss if someone injured themself on your property, but would you want to deal with the hassle of doing it all on your own? Making sure you sustain the lowest loss possible? If you have a $100,000 injury on your property, the insurance company is going to do everything in its power to make sure they pay not a penny more than $100,000–sometimes even less. What if by “doing it on your own” you get hit for $125,000?

Penny wise, dollar foolish IMO.

WhyNotUs
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by WhyNotUs » Sat Sep 23, 2017 9:40 pm

House paid off and home and Umbrella in place.
Have dropped comprehensive on cars in the past in similar situation but would not drop liability.
Can't think of a scenario that would lead me to drop home insurance at today's rates.
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StevieG72
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by StevieG72 » Sun Sep 24, 2017 6:03 am

Terrible idea.

A friend's parents allowed their policy to lapse.

House burned to the ground a few weeks before xmas.

It is not a gamble worth taking, insurance is relatively cheap.
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IowaFarmBoy
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by IowaFarmBoy » Sun Sep 24, 2017 6:23 am

willthrill81 wrote:
Sat Sep 23, 2017 7:40 pm
It's completely anecdoctal, but between my wife and me, we don't personally know anyone who's had their home completely destroyed. And the average American supposedly knows about 2,000 people.
For another completely anecdotal and largely meaningless point of view, if your sample is the six houses that border on ours, one of six has been totally destroyed by fire.

I agree that it is a low risk but is not one I feel like we want to take, especially with the other coverages like liability included.

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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by oldcomputerguy » Sun Sep 24, 2017 6:25 am

Nope. Our home is paid off, and we still maintain homeowners' insurance. It's budgeted throughout retirement.
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bottlecap
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by bottlecap » Sun Sep 24, 2017 6:39 am

I would never drop it, I'm not in love with insurance.

Either your home is too much of your net worth not to insure or it's only a small fraction, which means you should have liability insurance and an umbrella.

I'm sure there is some other place in your budget where you can save that money.

JT

mmcmonster
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by mmcmonster » Sun Sep 24, 2017 6:48 am

WarChest wrote:
Sat Sep 23, 2017 4:44 pm
As for liability, people mention that and I guess I kinda agree. But I have my doubts as to how reasonable it is to be worried about that. I think it is so unlikely that I would ever run into anything that I'm basically willing to go without coverage. I also don't have umbrella...
I have a good friend who invited family over for a dinner. One of his cousins tripped and fell on the walkway of the house and had a hairline fracture, taking her out of work for several weeks.

She sued him for damages and won. :annoyed (She was freelance and wasn't insured herself.) It wasn't a lot of money and it ruined their relationship, but it did happen.

J295
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Joined: Sun Jan 01, 2012 11:40 pm

Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by J295 » Sun Sep 24, 2017 7:05 am

I like OP's creative thinking, but I think having this coverage is valuable on a risk/reward basis. For sure the liability coverage (whether through homeowner's or some other coverage) is critical. It's not just a home, but at other locations outside home where your negligence puts you at risk (accidents happen).

Beto
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Beto » Thu Nov 02, 2017 5:48 pm

I dropped all of my insurance over 10 years ago. 0 home owners insurance, Auto, only the minimum liability. No life insurance. 0 insurance except liability for my car.
I was a little nervous at first but since have no regrets. In my neighborhood of about 1000 homes. I cannot remember one house fire. Mine will be next for sure now. But, I will take my chances.
In the last 10 years I have saved over 30 thousand dollars living debt free.

Mike14
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Mike14 » Wed Nov 08, 2017 6:11 pm

Increasing one's deductible reduces the premium significantly and is a good middle ground to cover against catastrophic events.
Shopping through an independent broker can cut the premium in half since insurance companies will often initially under-price in order to win your business. Just make sure to get new quotes every 2-3 years and be prepared to switch.

Broken Man 1999
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Broken Man 1999 » Wed Nov 08, 2017 6:26 pm

Not gonna do it. Wouldn't be prudent.

Our homeowner's policy premium here in Florida where the hurricanes visit periodically is not even 1% of the value of our home.

I could self-fund the rebuilding easily enough, but the liability could wipe us out.

No reason to take that type of risk.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

Nate79
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Location: Portland, OR

Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by Nate79 » Wed Nov 08, 2017 6:42 pm

Hey, if you can write a check to replace whatever you are insuring and not blink an eye, go ahead. But for most this is not practical or advised.

MikeG62
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Location: New Jersey

Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by MikeG62 » Wed Nov 08, 2017 7:30 pm

In a word, no.

soupcxan
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by soupcxan » Wed Nov 08, 2017 7:34 pm

[deleted]
Last edited by soupcxan on Sun Dec 10, 2017 3:21 pm, edited 1 time in total.

TravelforFun
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by TravelforFun » Wed Nov 08, 2017 7:47 pm

My house is paid for. I have homeowner, automobile, umbrella, and long term care insurance. I have thought about canceling the homeowner insurance but haven't pulled the trigger yet. My home is about 10% of my asset. I might pull the trigger one of these days... may be after my roof is replaced after a hail storm?

TravelforFun

JBTX
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by JBTX » Wed Nov 08, 2017 7:49 pm

Yes, I'll say it is a horrible idea, unless you have 10 million dollars.

Even if you can "afford" a $275K loss, that means you have to have $275 in liquid savings. Get a high deductible, and pay the premium of a couple of thousand a year.

In terms of net worth, we could "afford" to rebuild our house from cash, but it would require us depleting our liquid savings and dipping into retirement savings.

We've actually received about as much benefits from home insurance as we have paid out in premiums over 20 years.

Also agree on the liability insurance in home policy. We actually maximize that to the limit.

WarChest
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by WarChest » Wed Nov 08, 2017 11:50 pm

OP here, thanks for the replies.

We are keeping the home insurance for now (with high deductible it's only about $600/year). We just set up a HELOC which actually requires insurance in place so that helped with the decision. Also, while I ascribe little value to the structure (especially if we are going to tear it down soon), the liability portion of the insurance seemed worthwhile to me. If the premium was a few grand a year I might think differently, but seems cheap enough to keep for now (and allows access to HELOC).

snowox
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by snowox » Thu Nov 09, 2017 6:12 am

I would not drop home insurance but I do have my under insured. Basically to cover the cost of the dwelling when you do the math. Took some bickering with my agent but I got it done. Where I live the property is worth about 35-50% of the value. Lots are so expensive. So to me it made sense but like i said I wouldn't go without insurance completely.

sport
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Location: Cleveland, OH

Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by sport » Thu Nov 09, 2017 8:16 am

snowox wrote:
Thu Nov 09, 2017 6:12 am
I would not drop home insurance but I do have my under insured. Basically to cover the cost of the dwelling when you do the math. Took some bickering with my agent but I got it done. Where I live the property is worth about 35-50% of the value. Lots are so expensive. So to me it made sense but like i said I wouldn't go without insurance completely.
Keep in mind that you want to insure the cost of rebuilding the structure, not the value in the real estate market. In some areas, construction costs are very high. Also, if you are not at least 80% insured, insurance will pro-rate smaller claims and will not pay in full.

mnnice
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by mnnice » Thu Nov 09, 2017 8:33 am

IowaFarmBoy wrote:
Sun Sep 24, 2017 6:23 am
willthrill81 wrote:
Sat Sep 23, 2017 7:40 pm
It's completely anecdoctal, but between my wife and me, we don't personally know anyone who's had their home completely destroyed. And the average American supposedly knows about 2,000 people.
For another completely anecdotal and largely meaningless point of view, if your sample is the six houses that border on ours, one of six has been totally destroyed by fire.

I agree that it is a low risk but is not one I feel like we want to take, especially with the other coverages like liability included.
Also anecdotal I know some one that came home from work and her house had burnt to the ground. I know her really well. She was me :( .

Statistically houses fires are less common than they were a generation ago. Doesn’t mean they don’t happen.
Last edited by mnnice on Thu Nov 09, 2017 10:54 am, edited 1 time in total.

SimonJester
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Re: Anyone own a home and drop insurance coverage after mortgage paid off?

Post by SimonJester » Thu Nov 09, 2017 8:55 am

sport wrote:
Thu Nov 09, 2017 8:16 am
Keep in mind that you want to insure the cost of rebuilding the structure, not the value in the real estate market. In some areas, construction costs are very high. Also, if you are not at least 80% insured, insurance will pro-rate smaller claims and will not pay in full.
Not to mention there is demolition and cleanup of the existing lot before construction can begin. This figure can easily be upwards of $30K. Then you have new permits, engineering plans etc....

Dropping insurance all together also carries a big liability risk. With no insurance guess who is going to pay the lawyer bills to defend a lawsuit...
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

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