There's a great sense of freedom in mailing that final check to your mortgage company. And once you no longer owe money on your home, you may be wondering what you should do next — and whether or not you need to hold onto your homeowners insurance.
Unless you paid for the home out of pocket, your lender probably required you to have some type of homeowners insurance before closing. Because they have the right to take possession of your property if you're unable to make mortgage payments, having homeowners insurance helps to protect their financial interest in case something happens.
You aren't legally required to have homeowners insurance after you've paid off your house. However, it's wise to hold onto your home insurance policy to protect your home, personal belongings, family liability, temporary living costs, and more, in the wake of a loss. After all, there's a reason most mortgage lenders require homeowners coverage.
why it’s important to have homeowners insurance — period
You've probably heard time and again that your home is one of the largest investments you'll ever make — and it's true. In contrast to owning a car, houses generally go up in value over time. That's why you want a policy that can help cover major repairs or rebuilding costs should disaster rear its ugly head.
And remember, home insurance doesn't just safeguard the structure of the home — it can also extend to your possessions, potential lawsuits, and guest medical costs. Additionally, most home insurance companies — including Esurance — help pay for temporary relocation expenses if your home is left uninhabitable by a covered incident.
So, while homeowners insurance isn't legally required, you could be saving thousands — if not millions — of dollars having to pay out of pocket.
things to consider after paying off your mortgage
After you've paid off your mortgage in full, there are some things you may want to focus on with your homeowners insurance.
Contact your insurer and real estate taxing authority
If you've been paying your home insurance and property taxes through escrow, you may want to let your insurer and taxing authority know that you've paid off your mortgage, as this ensures they send bills to you since you're now responsible to pay them off on your own.
And don't forget to terminate automatic payments if you've set them up with your bank.
Make sure your remaining escrow balance is returned
Mortgage lenders have a tendency to take a while to refund escrow balances once mortgage loans are paid off. The main reason for the delay is because they want to be sure you've successfully paid off the final loan in full. Not only that, it may take some time for that last check to clear.
Typically, your refund check should arrive in a few weeks, so stay on the lookout for the refund in the mail.
Decide whether or not you want to change your current coverage
Since you're no longer at the whim of your mortgage lender, this may be a good opportunity to speak with your insurer about your homeowners coverage. Now that you're home free (as it were), you may have the footing to make adjustments to your coverage that save you money or better accommodate the needs of you and your home.
On an important note, make sure that your mortgage lender is no longer named on the insurance policy. Since they don't have a claim on your house, they shouldn't be granted any payout that results from a covered loss. If you forget to remove the lender's name, it could hold up any claims processed in the future.
get a free homeowners insurance quote from esurance
Becoming a true-blue homeowner may lend itself to a wider variety of options — like getting reliable, personalized homeowners coverage. With an Esurance policy, it's easy to tailor coverages around the unique needs of your family and home, in addition to winning big on some awesome savings. So start your free homeowners insurance quote online or speak to an agent at 1-866-439-5633.
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