Is House Insurance Cheaper Without a Mortgage: An In-depth Explanation

Paying off your mortgage marks a significant milestone, an accomplishment that eludes many and often spans decades.

The absence of a mortgage brings unparalleled freedom, alleviating the stress associated with monthly payments.

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Is House Insurance Cheaper Without a Mortgage

Now, you can actively channel funds towards robust savings for retirement or other objectives, concurrently witnessing a substantial surge in your net worth as you own your home outright.

Yet, a pivotal inquiry arises: Does the absence of a mortgage result in cheaper house insurance? The response diverges from common expectations.

Home Insurance Overview

Experience the incredible freedom of not having a mortgage.

The stress of monthly payments is now a thing of the past, allowing you to redirect funds towards aggressive savings for retirement or other financial goals.

Owning your home outright also results in a substantial increase in your net worth.

But here’s the big question on most people’s minds: is house insurance cheaper without a mortgage? The answer may not align with common assumptions.

Let’s address the question of whether you need home insurance after settling your mortgage.

While the law doesn’t mandate home insurance, unlike auto insurance, no one requires you to maintain it after paying off your mortgage. However, there are crucial reasons to consider keeping it.

Mortgage Lender’s Role

Mortgage lenders mandate home insurance for all borrowers to protect both parties.

In the event of a total loss, such as a fire, insurance covers the cost of rebuilding your house, ensuring you and the mortgage company don’t face a total loss.

Even after paying off your mortgage, you no longer have a lender requiring insurance.

Yet, just as when you had a mortgage, home insurance serves to protect you. Imagine facing a major disaster without insurance – to safeguard your finances, maintaining home insurance remains a smart decision.

Consequences of Going Without Home Insurance

Now, let’s explore the consequences of not having home insurance.

If you don’t have home insurance, you bear the responsibility for covering the costs of all damages that might occur.

This extends beyond natural disasters to scenarios like vandalism, theft, weather damage, frozen pipes exploding, or falling objects – all potentially resulting in significant repair expenses.

Without home insurance, you’d be required to cover the full cost of repairs for any issue that affects your home.

According to the Insurance Information Institute, the average homeowner’s insurance claim totals $13,955 – a considerable amount compared to the typical annual cost of home insurance premiums.

Home Insurance Costs After Mortgage Payment

Is house insurance more affordable without a mortgage? Let’s explore this question and delve into strategies for calculating savings.

Contrary to expectations, the answer is no. The cost of house insurance doesn’t decrease after paying off your mortgage. Here’s why.

Insurance companies assume the same risk whether your home is mortgaged or not. Although mortgage lenders mandate home insurance, it doesn’t elevate the policy’s cost.

Factors Influencing Premiums

While your mortgage status doesn’t impact premiums, certain factors can help lower them.

  1. Consider a Higher Deductible: Evaluate if you can afford a higher deductible, as this can lead to reduced premiums. Use budgeting tools like YNAB to determine the feasibility of allocating funds for a higher deductible.
  2. Explore Discounts: Inquire about available discounts, such as bundling home and car insurance. Additionally, some insurers offer discounts for security systems, paperless billing, or setting up auto payments.
  3. Limit Claims: The fewer claims you file, the lower the risk you pose to insurers. Only file claims for significant issues, covering smaller expenses yourself to avoid premium increases.
  4. Periodically Shop Around: Regularly shop around for insurance to potentially find more affordable premiums. Switching insurers every few years may yield lower rates, especially for new customers.

Post-Mortgage Insurance Considerations

After celebrating mortgage freedom, there are essential steps to take with your home insurance.

  1. Notify Your Insurance Company: Inform your insurer that you’ve paid off your mortgage, ensuring the removal of the lender’s name from your policy. Provide a copy of your paid-in-full letter to facilitate the update.
  2. Adjust Billing Details: If your mortgage company handled insurance payments, update your billing details. Consider setting up automatic payments, potentially qualifying for a discount.
  3. Review and Adjust Your Budget: With your mortgage payment gone, adjust your budget accordingly. Incorporate the insurance premium, using budgeting apps to stay organized and on track.

Managing Property Taxes

Remember that alongside home insurance, you must now handle property taxes independently. Planning for these payments is crucial.

  1. Create a Sinking Fund: Establish separate sinking funds for insurance and property taxes. Divide the annual amounts by 12 and set aside the monthly contribution to avoid financial strain.
  2. Ensure Timely Property Tax Payments: Pay property taxes promptly to prevent potential consequences, such as tax liens on your property.


While house insurance costs remain consistent after mortgage payment, adopting prudent financial practices is crucial.

Post-mortgage, maintaining timely payments for insurance and property taxes becomes your responsibility, requiring careful budget planning and adherence to payment schedules.


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