If your home is not paid off, your mortgage company demands that you keep at least basic insurance on it lest anything should go wrong. Basic insurance will -maybe- pay off what you owe on your mortgage if anything should happen to your home.
Many homeowners prefer more coverage, such as coverage that includes replacing the contents of the home, up to a certain value. It is also important to include things like additional flood insurance if you live in a flood prone area. While you can get plenty of information from your insurance agent about the best type of policy for your home, there are other things to keep in mind.
For one thing, if you purchase a homeowner’s insurance policy through your finance company, you will generally get less coverage but pay more for it. Even if your policy is cheaper on the surface, you might be surprised to learn that you are paying the same rate of interest on the cost of your policy that you are paying on your mortgage. Insurance payments are not simply divided into installments and added to your monthly mortgage payment, they are actually calculated as part of your mortgage and you are being charged the same interest rate on the total price of the policy.
Any savings you assumed you were getting are quite possibly being lost this way, so it’s worth checking into. When your homeowner’s policy is up for renewal, consider purchasing insurance elsewhere, or pay the full amount for the policy at renewal, instead of making payments.
If you call an apartment or another type of rental home, consider purchasing renter’s insurance. It may pay to replace all the contents of your home in case of theft or another type of emergency. Since it is unlikely that the owner of your home carries insurance that will cover your belongings, it’s worth looking into.