Canceling Your Property Insurance is a Risk
Rising costs of property insurance in Texas have fueled a new trend, canceling property insurance policies to save money. With the price of premiums increasing in the past few years, some Texas homeowners are choosing to go without property insurance, figuring that the savings are worth the risk of going without coverage in a hurricane-prone state.
The average cost of home insurance in Texas is $4,142 a year, making Texas the fifth most expensive state in the country for homeowners insurance. The average Texas homeowner insurance rates are $1,361 more than the national average of $2,777 for the coverage level of $300,000 dwelling coverage. $1,000 deductible.
On average, about 12% of homeowners are shedding coverage, according to the Insurance Information Institute. Homeowners are encountering limited options for renewal due to insurance providers being reluctant to supply inexpensive coverage. The majority of people opting to forego coverage are homeowners without mortgages, including retirees who have fully paid off their home loans. To avoid needing to acquire insurance, some clients are taking out loans with the purpose of utilizing the funds to pay the mortgage entirely, removing the need to obtain coverage. Wealthy people who are generally in the position to get large amounts of money and utilize assets, financial investments, stocks and bonds, land, and large bank accounts to serve as assurance have this option open to them.
Why do property owners drop their coverage?
High policy costs are often the main factor, but surveys by the insurance industry suggest that some people without mortgages may also opt to cancel their policies just because they can. In addition, the industry's reputation is a major contributing factor. The insurance industry doesn’t have the most stellar reputation. Customers can be frustrated with perceived complications with insurance agents and sometimes insurance people act poorly, incorrectly, and even illegally.
What to Know if You Consider Dropping Insurance Coverage
No one is immune to unexpected events that could damage or destroy their home and leave them responsible for all repairs and replacements. Standard insurance generally covers more than just damage caused by a storm, such as damage from a fire or other disasters, as well as liability protection to help with court costs and payments awarded against you in a lawsuit. Though some people think foregoing insurance coverage could be a way to save money, they risk financial ruin if tragedy strikes. If a hurricane, tornado, or fire strikes in Texas, the costs of debris removal, rebuilding a home, and temporary housing could easily exceed the value of the property, even if only partial damage is done.
Canceling Property Insurance Once Your Home Is Paid For
A tempting notion for Texas homeowners is to cancel their home insurance once their house is paid for. If you don’t have a mortgage, there is no law stating that you must maintain coverage. It’s your choice.
However, many Texans fail to realize that the financial burden they would undertake in the event of a major loss such as a hurricane or house fire may be too much to bear.
Once your home is paid for, it is still highly recommended to maintain home insurance coverage. Despite no longer having a mortgage, not having a home insurance policy can leave you vulnerable to potential financial burdens caused by a major loss or disaster. Not only will a standard home insurance policy cover the cost of rebuilding your home, but also the restoration of personal property and living expenses during your displacement. Maintaining an affordable home insurance policy is the best way to make sure you are properly protecting yourself and your property.
What happens to a mortgage if homeowners insurance is canceled?
If you have a mortgage, and your home insurance policy is canceled, or not renewed, you must secure a new policy right away. All mortgages have legal terms and conditions requiring that you keep a current home insurance policy throughout the duration of the loan. Failure to do this puts you in a risky situation. The lending institution could demand that you pay for the rest of the mortgage immediately in order to mitigate their risk, or the loan can go into default. This could be a huge financial burden, which could mean starting the foreclosure process. Homeowners may also face a situation in which their lender will purchase a policy for their home immediately regardless of how much it costs or covers beyond the structure of the home.
Home Insurance Rates by State for 2023
