At 74, He Plans to Drop a $9,200 Policy on a Paid-Off $650,000 House, But the Liability Coverage Is the Real Loss

Dropping a $9,200 homeowners policy on a house that is already paid off can seem like simple arithmetic, until the bundled liability protection becomes the thing standing between savings and a potentially costly lawsuit.

In this scenario, a 74-year-old retiree owns a $650,000 home free and clear. Since no mortgage lender requires coverage, his homeowners premium has climbed to $9,200 a year, and he is considering canceling at renewal and covering any property damage from savings. Many retirees with paid-off homes face the same calculation as premiums rise. For the house itself, the logic has some merit. The bigger issue is the personal liability protection included in the policy.

A long-running Bogleheads forum discussion, Anyone with a paid off house drop homeowners insurance, explores this exact dilemma. One commenter captured the concern this way: “The problem is I’m terrified of dropping liability, and you can’t have liability without homeowners.”

Why a $9,200 Bill Tempts Retirees With No Mortgage

That premium equals about 1% of the home’s value each year. Over 10 years, it adds up to $92,000. It is also roughly 12% of what the average U.S. household spent in total in 2024: $78,535.

Replacement costs continue to rise as well. The Case-Shiller national home price index stands at 337, using January 2000 as a base of 100, which is about 2% higher than a year earlier. Suze Orman’s warning applies here: “Are you insured for what your property is currently worth? And will your insurance company replace it at what it costs to replace it today versus just what it’s valued at?”

Property Damage Has a Limit, but Lawsuit Risk Does Not

Damage to the house is a defined risk, and even a total loss is capped by what it costs to rebuild. Someone with enough liquid assets may decide to self-insure that risk. Liability claims are different. If a guest slips on the front steps, a tree falls on a neighbor’s car, or a dog bites a delivery driver, the amount at stake can depend on a jury and has no fixed ceiling.

Legal defense is often underestimated. RIA Advisors notes that defending a serious personal injury case can cost six figures even if the verdict goes in your favor. With homeowners insurance, the insurer provides and pays for the lawyers. Without it, those costs come straight from savings.

The amount of exposure also depends on where the money is held. ERISA-governed employer plans generally have strong federal creditor protection. IRA protection varies by state, home equity depends on the state’s homestead exemption, and taxable brokerage and bank accounts are usually exposed.

Canceling May Also Eliminate the Cheapest Umbrella Coverage

Umbrella insurance usually costs $150 to $300 a year for the first $1 million, making it one of the least expensive ways to buy liability protection. But it generally requires qualifying underlying coverage. Insurers often ask for $300,000 to $500,000 of homeowners liability before they will issue a personal umbrella. If the homeowners policy disappears, the umbrella may become unavailable, or a major coverage gap may open at the bottom.

Two Choices, but One Is Usually Better for Retirees

Keep the Policy and Self-Insure Smaller Losses

For many people in this situation, a practical alternative is to keep the policy but raise the deductible sharply, perhaps to $10,000 or $25,000, and eliminate coverage they do not need. That would allow him to pay for routine repairs himself, as planned, while still preserving catastrophic property protection, the insurer’s duty to defend him, and access to a relatively inexpensive umbrella policy. Any savings from a higher deductible depend on the carrier and the state, so it is worth getting actual quotes.

Go Without Coverage Entirely

Dropping insurance altogether only makes sense if he could rebuild the entire house from liquid assets and most of his net worth is in creditor-protected accounts in a state with a strong homestead exemption. Even then, he would still have to pay for his own legal defense. For a typical retiree whose savings are partly in taxable accounts, this approach may reduce costs on paper while leaving the biggest risk uncovered.

What to Review Before Renewal

1. Get prices for the alternatives first. Ask for homeowners quotes with much higher deductibles, liability coverage of $300,000 to $500,000, and a $1 million umbrella policy. Compare that total with the current $9,200 premium.
2. Identify which assets a lawsuit could reach. Review each account and whether the state protects it. If most assets are in taxable accounts and the homestead exemption is limited, an independent agent who can shop specialty carriers offering stand-alone personal umbrella policies may change the picture.

At renewal time, compare those quotes with the current premium. Since rebuilding costs and insurance prices keep changing, it makes sense to revisit the calculation every year rather than decide once and never check again.