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Is House Insurance Cheaper Without a Mortgage

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Did you know over 140 million homes exist in the United States?

As a homeowner, you're expected to have house insurance alongside your mortgage. But you may find yourself asking: 

"Is house insurance cheaper without a mortgage?"

Becoming a homeowner requires spending a lot of money. From maintenance to insurance and fees, there's no shortage of ways to pour money into your home. And on top of it all, most mortgage companies require you to have house insurance.

It's understandable if you're looking for ways to cut corners and save. If you're interested in learning about saving on house insurance, then keep reading!

What Is House Insurance?

House insurance, otherwise known as homeowners insurance, covers the loss and damage to your property. This includes internal furnishings and assets inside of your home.

It's important to note that homeowners insurance is different than mortgage insurance. Mortgage insurance helps protect your lender in case you do not make your payments on time.

House insurance covers four different kinds of incidents: loss or damage of belongings, injury on the property, interior damage, and exterior damage. If a claim is made on one of these incidents, the homeowner must pay a deductible out-of-pocket. 

An example of this would be if there was a water leak inside of the home. A claims adjuster would come to the house and investigate the situation. If the claims adjuster believes that you required $10,000 for the incident, you would have to pay a deductible and your insurance would pay the rest. 

In most cases, the deductible is less than what the insurance pays.

All house insurance policies have a liability limit that determines the maximum amount of coverage a homeowner can receive. It is usually around $100,000, but the homeowner can receive a higher limit if needed. 

There are two main categories that are not covered by your house insurance: acts of war and acts of God. Acts of war refer to damage caused by riots, strikes, military coups, invasions, and terrorism. Acts of God refer to earthquakes or floods, but not natural disasters such as hurricanes and tornadoes.

If you live in an area prone to natural disasters, you must purchase special coverage for your property, such as flood insurance. 

How Much Is It?

House insurance premiums vary per state in the U.S. For instance, Delaware has the lowest rates set at an average of $781 annually. But Colorado's average rate is $3,383.

There are multiple factors that affect the average rate of each state. For example, the house insurance risk and the amount of coverage an average homeowner purchases are both factors. 

The states that have the highest house insurance prices are where natural disasters occur more frequently. These states include Oklahoma, Tennessee, and Kansas.

Some house insurance policies also have the option of adding earthquake coverage to your plan.

The national average for house insurance premiums is around $1,784. The states that pay the least are Delaware, Vermont, Pennsylvania, and Maine. 

Each homeowner will face different factors that will affect their personal rates. These include:

  • Pets
  • Special Features
  • Location of your home
  • Materials used to build your home
  • Home's age

If you have an "aggressive" breed of dog, you may pay higher rates. In addition, features such as a hot tub or swimming pool may be considered "attractive nuisances" that pose a danger to guests.

Living in areas with high crime rates is factored into your premium, as well as the current wear and tear of your home. And since certain materials are more vulnerable to termites and fire, the materials that make up your home can raise your insurance rates. 

But there are a few factors in your control that affect your house insurance premium. Having a good credit score, choosing a higher deductible, and renovating your home may all lower your premium rate. On the other hand, increasing coverage limits and a lengthy history of personal claims may raise your premium. 

Buying House Insurance 

Your mortgage lender may recommend an insurance company to buy your homeowners insurance through. But that does not mean you have to choose them.

There are a few ways to lower your house insurance cost. One of the best ways before doing away with your mortgage is to get quotes from multiple companies. This is easy to do when your policy is up for renewal or if you've made changes to your current policy.

Another great way to lower the cost of your house insurance is to raise your deductible. As mentioned before, a higher deductible means that your insurance will have to pay less. This results in a lower premium.

That being said, you should only raise your deductible if you have enough to cover an unexpected expense. 

And finally, buying a house without a mortgage will lower the cost of your house insurance. Once you've paid off your mortgage, you aren't federally required to have homeowners insurance. Though this will save you the most money, it is a risk you must be willing to take. 

If an accident occurs, you must be willing to pay for the entire repair if you do not have insurance. 

There are also plenty of ways to purchase a home without a mortgage so that you don't have to get homeowners insurance. Whether you buy in cash, go through seller-financing, or apply for a government loan, you don't need a mortgage to own a home. 

Is House Insurance Cheaper Without a Mortgage?

So, is house insurance cheaper without a mortgage? The answer is yes, but there is a risk involved. If you do not have house insurance, then you must pay for all accidents and damage out-of-pocket.

Since mortgage lenders require you to have homeowners insurance, you may also consider purchasing a home without a mortgage. And even if you don't have a mortgage, you may still buy house insurance.

If you're interested in finding the best house insurance policy for your situation, contact us for more information!

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