How Much homeowners Insurance Am I Required to Have?

Your mortgage company is going to require you to carry at least enough coverage to pay off the mortgage if the home is destroyed. Once the home is paid off, you won't have to worry about that as much, but then you'll find that the hom einsurance company requires you to carry at least enough insurance to cover the value of the home, just as the mortgage company did.

You can lower your coverage amount if you want, but your insurance company may decide to penalize you for doing so. The reason is a simple one: Without enough insurance to pay for repairs or replace the home, the insurance company loses their insurable interest. It does not make much sense to pay out on a claim that is not sufficient to pay for the damages because it does not accomplish what the insurance is designed to do. It is not a matter of greed; it is a matter of fair practice. You cannot expect the insurance company to replace your home if you are not interested in paying for the coverage, and unless the home is replaced, the policy serves no valid purpose.

If you want to reduce your coverage but you do not want to be penalized, you can drop the personal property portion of the policy. In that event, you would be responsible for replacing all of your personal belongings, such as your furniture, clothing, appliances, electronics, etc., out of pocket. The home itself would still be insured for full value, but you would be gambling with your personal possessions. If you want to take that risk, and it is not advised, then you have a way to reduce the cost of insurance without causing yourself problems with the insurance company.