does it matter to the insurance company if a mortgage is paid off?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jan 10, 2019

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Insurance Question from Seffner, FL

Asked on 01/10/2019

does it matter to the insurance company if a mortgage is paid off? should rates change if mortgage is paid in full?

Answer given on January 13, 2019

If you pay off the mortgage on your home, there is no change to the homeowner policy other than the obvious point that the mortgage company should be removed from the insurance policy. This should be done promptly so if there is a homeowner claim, any claim settlement will be paid directly to you without the mortgage company being involved.

You will need a copy of the settlement of the loan to send to the insurance company or your agent. Usually a certified copy is not required, but check with the insurance company or agent to confirm that. 

The amount of insurance on your home should not change, since insurance companies insure your home for its replacement cost and the amount of the loan is not a factor. However, be sure you have kept the insurance amount up to the current replacement cost of building in your area, since recently many homeowners have found they were grossly underinsured at the time of a major loss.  The insurance company has a responsibility to keep your home insured, but so do you as the homeowner.

IMPORTANT NOTICE: These answers are for general information purposes only and are provided by the person answering and AS IS. It has not necessarily been reviewed by the management staff of nor is it binding any insurance agent, broker, or other insurance professional or any attorney or insurance company. Insurance laws, regulations and practices vary from state to state and insurance policies and practices differ from company to company, by type of policy, by state and locality and by type of insurance. Tiny variations in the facts, policy language or a detail not set forth in a question often can change the outcome or a professional's conclusion. Although has confirmed that the answer(s) was/were provided for the account of an experienced insurance professional, that professional may not be licensed in the state referred to in the question, and may not be experienced or up to date in the subject area. Unlike the answers provided here, upon which you should NOT rely, for personal advice you can rely upon we suggest you consult a licensed insurance professional in your area or retain a licensed attorney listed on to represent you.

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