Can my Coverage Ever be Dropped?

When you are paying insurance on your home year after year after year and never making a claim you may start to think about how much money you are actually spending. This might get you thinking about dropping certain limits or certain coverage options or possibly even dropping house insurance altogether. Is this even possible? It all depends on your situation.

Dropping house insurance altogether is normally not allowed. If you are paying a mortgage then it is required by all lending companies that you have adequate coverage. After all, until you pay the bank back, your home is their investment too and they want to protect this. Once you own the house outright the bank will not require you to have house insurance anymore and thus, it is possible to drop your coverage then. However, it is not recommended that any homeowners do this.

Even if you do not owe any money on your home, you are still responsible to other costs, such as home improvement projects. When the house is paid off this is the time that many homeowners look into different renovations and side jobs to do. Or, you may even look to buy another home or another big investment once the debt is paid off. What this means is that you will still have debt and still need some level of insurance just in case.

But let's say you decide to live debt free from now on. What happens if your home is damaged in a fire and you are without coverage? Then you are looking at a $200,000 home that is now worth nothing and 30 years of paying off a mortgage and nothing to show for it. Why would anyone risk this when you don't have to?

Dropping House Insurance Coverage

You can, however, re-evaluate the amount of coverage you actually have. While most homeowners will actually add more coverage as time goes on and the house prices increase, it is possible to do the opposite and look at getting lower limits for your coverage. Furthermore, as time goes on you may also acquire new items and thus you will want to re-evaluate your contents insurance as well. Again, most homeowners will choose to add more but it is possible to do the opposite if you decide.

Lowering your limits and dropping some of the coverage options is going to save you money on your premiums but there is a risk you will be making when doing so. However, if this is a risk that you are willing to take, then you can certainly contact your provider to negotiate lower coverage limits and a lower premium as well. You might wish to get an appraiser in to re value the house and take inventory of all your items and the items worth insuring when you are looking at dropping coverage.

Lower Premium Higher Deductibles

Rather than dropping your coverage it might be wiser to increase your deductible when looking into your homeowner insurance policy. What this means is that you are paying a higher amount if you need to put in a claim but lower premiums every year. A standard homeowner policy comes with a $1,000 deductible but you might wish to up this to $3,000 or even $5,000 if allowed.

While your coverage can be droppedafter you are debt free it is never a good idea to completely drop your insurance. If you are looking for a cheaper rate you can re-evaluate your policy, up your deductible or shop around and compare prices often. This is your safer bet when it comes to insurance and your home.

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