Author Topic: Anyone drop homeowners insurance after mortgage payoff?  (Read 13876 times)

Gone Fishing

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Anyone drop homeowners insurance after mortgage payoff?
« on: February 06, 2015, 03:29:49 PM »
It would be pretty bold, but someone with $1,000k stache and a $100k home (not including land) could reasonably self insure.

Gerard

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #1 on: February 06, 2015, 04:21:41 PM »
I'm looking forward to the responses here. My house is barely worth more than its lot value, but I'm forced to insure it based on its replacement value, in a high-insurance-cost neighbourhood.

Rural

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #2 on: February 06, 2015, 05:26:58 PM »
We don't have insurance, and the house is paid off (well, we never owed on the house, but the land is paid off). But it's not by choice; we have to get it just a little more finished before we can insure.


The situation is slightly nervous-making, so I think we definitely will insure. For us, with 25 acres, the liability insurance for crazy trespassers who get hurt and decide to sue is probably worth as much as the fire insurance. Not worried about theft insurance - don't think we have anything I'd file on, but it would be nice to be able to rebuild on someone else's dime after a fire.

madamwitty

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #3 on: February 06, 2015, 05:34:41 PM »
I'll be interested in the responses as well. I expect to RE with something like $1M 'stache plus $500k home. I couldn't see ourselves dropping insurance.

Spork

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #4 on: February 06, 2015, 05:38:53 PM »
We don't have insurance, and the house is paid off (well, we never owed on the house, but the land is paid off). But it's not by choice; we have to get it just a little more finished before we can insure.


The situation is slightly nervous-making, so I think we definitely will insure. For us, with 25 acres, the liability insurance for crazy trespassers who get hurt and decide to sue is probably worth as much as the fire insurance. Not worried about theft insurance - don't think we have anything I'd file on, but it would be nice to be able to rebuild on someone else's dime after a fire.

I know what you mean.  I tried to insure ours at (wildly guessing) 60% completion (but livable).  They flat out refused.  The next company I called, I was less up front with information.  Mind you: I never ever said anything untrue.  However, I never said "It is not 100% complete."   They provided a policy with no issues.

But:  I cannot for the life of me understand the logic.  If I have 100% equity in house, why should it matter if the house is less than 100% complete?

clifp

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #5 on: February 06, 2015, 05:40:32 PM »
I dropped Hurricane insurance after the house was paid off, since the deductible was roughly the same price as it would cost to replace my large glass windows which are by far the most likely damaged I'd have.

I don't think it makes a lot of sense to drop homeowners. Generally the rates are pretty small 1,000 for 100K house seems high to me.

Rural

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #6 on: February 06, 2015, 05:43:19 PM »
We don't have insurance, and the house is paid off (well, we never owed on the house, but the land is paid off). But it's not by choice; we have to get it just a little more finished before we can insure.


The situation is slightly nervous-making, so I think we definitely will insure. For us, with 25 acres, the liability insurance for crazy trespassers who get hurt and decide to sue is probably worth as much as the fire insurance. Not worried about theft insurance - don't think we have anything I'd file on, but it would be nice to be able to rebuild on someone else's dime after a fire.

I know what you mean.  I tried to insure ours at (wildly guessing) 60% completion (but livable).  They flat out refused.  The next company I called, I was less up front with information.  Mind you: I never ever said anything untrue.  However, I never said "It is not 100% complete."   They provided a policy with no issues.

But:  I cannot for the life of me understand the logic.  If I have 100% equity in house, why should it matter if the house is less than 100% complete?


Yeah. I don't intend to invite anyone in to examine the room without wallboard or the lack of baseboards throughout. But we pretty well have to have siding on (all of) the outside - that's noticeable. :-)

Spork

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #7 on: February 06, 2015, 05:58:41 PM »
We don't have insurance, and the house is paid off (well, we never owed on the house, but the land is paid off). But it's not by choice; we have to get it just a little more finished before we can insure.


The situation is slightly nervous-making, so I think we definitely will insure. For us, with 25 acres, the liability insurance for crazy trespassers who get hurt and decide to sue is probably worth as much as the fire insurance. Not worried about theft insurance - don't think we have anything I'd file on, but it would be nice to be able to rebuild on someone else's dime after a fire.

I know what you mean.  I tried to insure ours at (wildly guessing) 60% completion (but livable).  They flat out refused.  The next company I called, I was less up front with information.  Mind you: I never ever said anything untrue.  However, I never said "It is not 100% complete."   They provided a policy with no issues.

But:  I cannot for the life of me understand the logic.  If I have 100% equity in house, why should it matter if the house is less than 100% complete?


Yeah. I don't intend to invite anyone in to examine the room without wallboard or the lack of baseboards throughout. But we pretty well have to have siding on (all of) the outside - that's noticeable. :-)

Mine was worse.   Outside fully complete.  Inside: downstairs fully complete, upstairs: no floors, electrical complete, plumbing 50% complete, drywall 80% complete, no paint, no trim. 

No insurance.  I argued.... I sent them pics.  Nope.

paddedhat

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #8 on: February 06, 2015, 06:46:52 PM »
I doubt the math will ever convince me. I've got a bit over a million in liquid assets, and a paid off, new place I just built, that's worth a bit over $150k.  The homeowner's bill is $364 a year.  No way in hell to convince me of the wisdom of self-insuring that risk.  Just over 2/10th of a percent for annual coverage, thank you very much, I'll keep it.

Astatine

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #9 on: February 06, 2015, 07:28:03 PM »
We're probably 18 months away from paying off our mortgage. I will always have house insurance. I may increase the deductible later if that's doable and makes sense to do so. Bushfire is the biggest risk where I live. 11 years ago, 500 houses burnt down in one night in my city. Several people I knew lost their house that night, and others came very close to losing theirs too. The year before that, I had embers blowing on to my roof from a nearby fire.

I would need a huge stash to feel comfortable about covering the replacement cost of our house. It's an old, basic 2 bedroom townhouse but replacement costs are relatively high here. The worst thing about houses needing to be rebuilt in Australia is that if it's a natural disaster (fire, flood, storm/cyclone), many houses need to be rebuilt/replaced at the same time. This drives up costs and you get shortages in builders and building materials and you end up not being able to move back in for ages.

Spork

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #10 on: February 06, 2015, 08:44:05 PM »

You can't get coverage while building?  How strange.  I built my house, paid cash, and got insurance through State Farm during the framing stage.  I told my agent I was building it and she didn't have any problems issuing a policy while under construction.  Are you building as owner/builder?

In my case (maybe Rural is different)... it was this:
* you can get insurance while building.  It's special construction insurance.
* you can get insurance when it is built

The problem lies between.  What if you build it so that when you're done... it's half built?  No more construction, just fiddling here and there for a while, finishing things at the pace that your own labor and funds can last?  In my case: that is difficult to insure.

TN_Steve

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #11 on: February 06, 2015, 10:14:21 PM »
LIABILITY INSURANCE.

Sorry for shouting.  :-)

Particularly given my ability and interest in construction, we could rebuild our house with the funds in our taxable accounts and work another year (or two?) to keep retirement on even keel.  But, there is no way on earth I'd go bare--if someone hunting on my property were to injure a neighbor, or if one of my trees were to fall on a UPS truck--or even if I were sued for personal negligence (non-automotive) of some sort, I would not want to be on the hook for defense costs or, less likely, a damages award.  (And, if anything, the risks are probably greater for someone who is in a neighborhood, rather than on pretty big acreage)

Interestingly, there was a thread on this very topic over at bogleheads last month....  https://www.bogleheads.org/forum/viewtopic.php?f=2&t=154886&hilit=liability+florida

And, BTW, according to one poster on that thread, liability-only insurance is available via certain underwriters at Lloyds; so maybe I shouldn't have shouted.  :-)
« Last Edit: February 06, 2015, 10:21:54 PM by TN_Steve »

Gerard

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #12 on: February 07, 2015, 05:54:50 AM »
I assume other places have the same options as in Canada, where we can get very low-cost combined contents and liability insurance (often called "renter's insurance", and required by some landlords). My plan (maybe) is to keep that and lose the house-replacement insurance, so I'll keep checking in here to see how the conversation goes.

AlexK

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #13 on: February 07, 2015, 06:09:44 AM »
I was uninsured for the past 6 years but just recently bought insurance for my primary residence ($361/yr) plus $1M umbrella liability policy which overlaps that plus 3 rental props plus 3 cars for $187/yr (cost after discount).

With assets approaching $1M I was concerned about what could happen if we were sued for something. Right now what would happen is State Farm would hire lawyers to protect their interests. Seems like a deal to me.

Villanelle

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #14 on: February 07, 2015, 06:24:49 AM »
I can't see us ever dropping it entirely.  We might jack up the deductible significantly, but I imagine we'll always keep it.

darkadams00

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #15 on: February 07, 2015, 07:21:55 AM »
Interesting topic. I've read numerous threads about dropping/keeping every form off insurance except home insurance. I think the overwhelming issue is the magnitude of a loss. To me, if a loss would negatively impact my financial position or path toward my financial goals, I would insure--regardless of the insurance type. When I was able to write a check to replace my car without needing months to recover the funds, I dropped collision/comprehensive. I would need a NW significantly higher than I will probably ever reach before I would self-insure my home. It's just too much money. But now I do have an approximation of what that figure would be.

kpd905

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #16 on: February 07, 2015, 08:07:50 AM »
As TN_Steve said, you'd still want some type of liability coverage in case someone got injured on your property.  Maybe an umbrella plan could be a better option once the mortgage is paid off, that way it covers your house and auto accidents.

Davids

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #17 on: February 07, 2015, 08:10:02 AM »
I would not drop homeowners insurance. Now dropping collision and comprehensive on an auto policy, that is a different story.

geekette

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #18 on: February 07, 2015, 09:15:53 AM »
We have a different situation - my DH and his sister inherited their father's 60 year old house last spring.  The homeowner's insurance had just been renewed, so it's good through early March under the old policy.

It's currently vacant, undergoing (incredibly slow) renovation (new electrical for new HVAC, refinish hardwood, plumbing), and we're fighting the clock to get his cousin, who will eventually buy it, moved in before the policy lapses.  I'm hoping we can get some sort of landlord policy. 

Mostly we're worried about falling trees (there are some HUGE oaks on the property).

Rural

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #19 on: February 07, 2015, 03:39:52 PM »

You can't get coverage while building?  How strange.  I built my house, paid cash, and got insurance through State Farm during the framing stage.  I told my agent I was building it and she didn't have any problems issuing a policy while under construction.  Are you building as owner/builder?

In my case (maybe Rural is different)... it was this:
* you can get insurance while building.  It's special construction insurance.
* you can get insurance when it is built

The problem lies between.  What if you build it so that when you're done... it's half built?  No more construction, just fiddling here and there for a while, finishing things at the pace that your own labor and funds can last?  In my case: that is difficult to insure.


Right. We could have (probably) gotten builders insurance, though it would have been difficult for an owner built place. We didn't, but we probably could have - though maybe not, as we were also living in an uninsurable mobile home on the same property.


But now that we have a certificate of occupancy and are living in the house, we can't get builders insurance for sure. And we can't get homeowners because it's not finished...


I agree with TN_Steve. The liability insurance is the thing I really want most.

Spork

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #20 on: February 07, 2015, 03:42:15 PM »

But now that we have a certificate of occupancy and are living in the house, we can't get builders insurance for sure. And we can't get homeowners because it's not finished...


Fancy!   (We never got a Cert. of occupancy.)  ;)

Rural

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #21 on: February 07, 2015, 03:54:58 PM »

But now that we have a certificate of occupancy and are living in the house, we can't get builders insurance for sure. And we can't get homeowners because it's not finished...


Fancy!   (We never got a Cert. of occupancy.)  ;)


Well, we got permission to move in from the head of the county inspectors office. I don't have an actual printed certificate I assume there's something on file with the county. Do you think they would print me a fancy certificate? :-)

Greg

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #22 on: February 08, 2015, 12:50:19 PM »
But now that we have a certificate of occupancy and are living in the house, we can't get builders insurance for sure. And we can't get homeowners because it's not finished...
Fancy!   (We never got a Cert. of occupancy.)  ;)
Well, we got permission to move in from the head of the county inspectors office. I don't have an actual printed certificate I assume there's something on file with the county. Do you think they would print me a fancy certificate? :-)

In my experience, as soon as you have an occupancy certificate (all rough-in needs to be covered etc.) you can get standard homeowners, that was the milestone for us.  No insurance inspection though, which I understand depends on your insurer.  My neighbor gets annoying letters every year or so ab out roof moss, etc, while I've never seen or heard of an inspector from our insurance company.

civil

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #23 on: February 08, 2015, 01:14:09 PM »

With assets approaching $1M I was concerned about what could happen if we were sued for something. Right now what would happen is State Farm would hire lawyers to protect their interests. Seems like a deal to me.

This. I got an umbrella policy when my assets went over my max insurance liability payouts, for this reason. I like using the insurance company's lawyers. And for small (i.e. non-fatal) issues, the insurance company does better investigative work than the police, in my experience.

Also, with neighbor kids shooting off bottle rockets and fireworks every year, I'm not about to self-insure.

Spork

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #24 on: February 08, 2015, 01:44:18 PM »
But now that we have a certificate of occupancy and are living in the house, we can't get builders insurance for sure. And we can't get homeowners because it's not finished...
Fancy!   (We never got a Cert. of occupancy.)  ;)
Well, we got permission to move in from the head of the county inspectors office. I don't have an actual printed certificate I assume there's something on file with the county. Do you think they would print me a fancy certificate? :-)

In my experience, as soon as you have an occupancy certificate (all rough-in needs to be covered etc.) you can get standard homeowners, that was the milestone for us.  No insurance inspection though, which I understand depends on your insurer.  My neighbor gets annoying letters every year or so ab out roof moss, etc, while I've never seen or heard of an inspector from our insurance company.

In our case, we had no uncovered rough ins... but very unfinished rooms.  One with no dry wall at all.  One bath with no fixtures.  No flooring.  Construction stairs, etc.   We had no C. of A as we didn't finance anything and were outside of city inspection areas.

Cassie

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #25 on: February 08, 2015, 04:52:38 PM »
I would never go without homeowner's insurance. I think it is dumb. Our house is paid for & it costs us about $500/year.

Rural

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #26 on: February 08, 2015, 05:03:24 PM »
But now that we have a certificate of occupancy and are living in the house, we can't get builders insurance for sure. And we can't get homeowners because it's not finished...
Fancy!   (We never got a Cert. of occupancy.)  ;)
Well, we got permission to move in from the head of the county inspectors office. I don't have an actual printed certificate I assume there's something on file with the county. Do you think they would print me a fancy certificate? :-)

In my experience, as soon as you have an occupancy certificate (all rough-in needs to be covered etc.) you can get standard homeowners, that was the milestone for us.  No insurance inspection though, which I understand depends on your insurer.  My neighbor gets annoying letters every year or so ab out roof moss, etc, while I've never seen or heard of an inspector from our insurance company.


I'd love to know who you have without inspections. It was always the stage at which the agent came to look at the house that got us.

NV Teacher

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #27 on: February 08, 2015, 07:09:54 PM »
We had a house fire (fireworks) a few years ago.  The insurance more than paid for itself.  I'll have the insurance thank you very much.

Heather in Ottawa

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Re: Anyone drop homeowners insurance after mortgage payoff?
« Reply #28 on: February 08, 2015, 07:23:23 PM »
Also insured. It's about 1/1000th of the cost of the house every year. I doubt I have a 1/1000 chance of a complete loss, and that's of course how they make a profit, but it's still worth it to me for the peace of mind. My deductible is $10,000, though, to keep the costs as low as possible.