Big Risk

Dear Dr. Per Cap: Last month, after 30 long years, my husband and I finally made the final mortgage payment on our home.  We’re thrilled to no longer have a monthly mortgage payment and look forward to saving some extra money for a much needed vacation.  But now my husband thinks that because we are no longer required to have homeowner’s insurance, we can save even more money by dropping the coverage.  Is this a smart move?

Signed, a Proud Homeowner

Dear Proud Homeowner:

That’s great news about paying off your mortgage!  So happy to hear you and your husband finally own your home free and clear.  I’m also glad you will be able to save some extra money now that the burden of a monthly mortgage payment is gone.  But dropping your homeowners insurance is not, I repeat not, a smart move.  Here’s why.

Regardless of who owns your home, you or the bank, the risk of losing your home due to fire, vandalism, or certain acts of nature is always present.  So in the unfortunate event that your house burns down, a good homeowner’s policy will pay out the value of your home so you can rebuild or purchase a new home.  A mortgage company will always require a borrower to have homeowner’s insurance because it has a vested interest in the property.  But that motivation is to protect its interest, not yours.  When a homeowner finally pays the mortgage off, the company could care less whether or not the home is insured, because it no longer has a financial interest in the property.  But you and your husband sure do.  And it would be a shame to lose the home you’ve worked so hard for and not have it insured.  Sadly, I’ve seen uninsured homes on the rez destroyed by fire, especially some of the older tribal homes that have long since been paid off, or even homes that people have built themselves without ever having a mortgage.  Believe me, it’s not a pretty sight.

I think sometimes people also just don’t understand how important insurance is because it’s not something we think about every day.  Whether we’re talking auto, homeowner’s, life, or health insurance – you name it – it often gets forgotten.  But it’s another financial product just like a credit card or a bank account, and it protects individuals and families against various risks they face throughout their lives.   Moreover, homeowner’s insurance is really cheap compared to other types of insurance, such as auto insurance.  It’s also easy to purchase regardless of whether you live in the city or on tribal land, and is readily available from a wide range of insurance companies.  So do yourself and your family a big favor and keep your homeowner’s insurance policy.  And, oh yeah, enjoy that well-deserved vacation!