Paying Off Your Home Is A Great Time To Update Your Home Insurance
One of the requirements you must follow when purchasing a home with a loan is buying a home insurance policy. You must keep homeowner's insurance on the house as long as you owe money to your mortgage lender. When you pay off your home loan, this requirement ends. While you should not cancel your home insurance at this time, it might be a good time to update your policy. Here are several changes you might want to make after paying off your loan.
Update the Home's Value
You might not realize how much your home's value increases over the years, and it is important to keep up with this information. If you have not updated your home's value recently, now is a good time to complete this step. Updating the home's value means that you increase coverage on your home insurance policy to reflect your home's actual value. If you purchased the home 30 years ago for $40,000, it might be worth $250,000 today. If you never update this amount, you will never have enough coverage on your home. Therefore, you might want to begin by adjusting the home's value on your policy to reflect your home's replacement cost today.
Change the Deductible
The second thing you can do at this time is to change the deductible. Many homeowner's insurance policies have deductibles of around $1,000. If you are not sure what yours is, ask your agent or read through your policy information. When you have a loan on your house, you might need a low deductible. When you pay off your home loan, you might instantly have more money in your pocket each month. As a result, you might not need a low deductible any longer.
If you want to save money on your homeowner's insurance premiums, you can instantly do this by adjusting the deductible. You might want to increase it to $5,000 or $10,000. In most situations, lenders will not allow homeowners to have high deductibles. There is too much risk to the lenders when homeowners have high deductibles. When you pay off your home loan, you no longer have to follow your lender's rules. Therefore, you can increase your deductible, which is often a good idea after paying off a loan.
If you have questions about your home insurance policy, talk to an agent. An agent can provide you with information and options for your home insurance coverage.