At 74 He’ll Drop the $9,200 Homeowners Policy on His Paid-Off $650,000 House. The Liability Half of It Will Be the Part He Misses

In this hypothetical, a 74-year-old retiree owns a $650,000 house outright. With no lender requiring coverage, his homeowner’s insurance premium has risen to $9,200 a year, and he plans to cancel at renewal and pay for any damage out of savings. The reality is that many retirees with paid-off homes run the same math as premiums rise. For the house itself, his reasoning holds up reasonably well. The weak spot is the personal liability coverage that comes bundled in the same policy.

A long-running Bogleheads forum thread, Anyone with a paid off house drop homeowners insurance, works through this exact question. One participant summed up the problem: “The problem is I’m terrified of dropping liability, and you can’t have liability without homeowners.”

Why a $9,200 Premium Tempts Paid-Off Retirees

The premium works out to about 1% of the home’s value every year. Over a decade, that’s $92,000. That’s also roughly 12% of what the average U.S. household spent in total in 2024: $78,535.

Rebuilding keeps getting more expensive too. The Case-Shiller national home price index is 337 against a January 2000 base of 100, up about 2% from a year earlier. Suze Orman’s test 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 Losses Have a Ceiling While Lawsuit Costs Are Open-Ended

House damage is a known quantity, and even a total loss tops out at the cost of rebuilding, and someone with enough liquid assets can choose to carry that risk himself. A liability claim works differently. If a guest falls on the front steps, a tree lands on a neighbor’s car, or a dog bites a delivery driver, the amount at stake depends on a jury and has no fixed limit.

People tend to underestimate legal defense. RIA Advisors notes that defending a serious personal injury claim can reach six figures even when the verdict goes your way. Under a homeowners policy, the insurance company hires and pays the lawyers. Without one, he pays those bills straight out of his savings.

His exposure also depends on where his money sits. ERISA-governed employer plans carry strong federal protection from creditors. IRA protection varies considerably by state, home equity depends on the state’s homestead exemption, and taxable brokerage and bank accounts are generally exposed.

Canceling Also Takes the Umbrella Policy With It

Umbrella insurance usually costs $150 to $300 per year for the first $1 million, which makes it the cheapest liability protection available. It only works on top of qualifying underlying coverage, though. Insurers typically want $300,000 to $500,000 of homeowners liability in place before they’ll issue a personal umbrella. Once the homeowners policy is gone, you either can’t buy that layer or you leave a large uncovered gap at the bottom.

Two Paths, and One Fits Most Retirees

Keep the Policy and Self-Insure the Small Stuff

For many people in his position, a common alternative is to keep the policy but raise the deductible sharply, possibly to $10,000 or $25,000, and drop extras he doesn’t need. He’d pay for routine repairs himself, as he planned anyway, while keeping catastrophic property coverage, the insurer’s duty to defend him, and access to a cheap umbrella. Savings from a higher deductible vary by carrier and state, so it’s worth getting actual quotes.

Drop Coverage Entirely

Going without insurance only makes sense if he could rebuild the whole house from liquid assets and most of his net worth is held in creditor-protected accounts in a state with a strong homestead exemption. Even then, he’d still pay his own legal defense. For a typical retiree whose savings sit partly in taxable accounts, this path saves money on paper while leaving the largest risk exposed.

What to Check Before the Renewal Date

1. Price the alternative first. Ask for homeowners quotes at much higher deductibles with liability set at $300,000 to $500,000, then add a $1 million umbrella. Compare that combined cost with the $9,200 he pays now.
2. Map which assets a lawsuit could reach. List each account and whether the state shields it. If most of the money is in taxable accounts and the homestead exemption is small, an independent agent who can shop specialty carriers that write stand-alone personal umbrella policies could change the outcome.

At renewal, watch the gap between those quotes and the current premium. Rebuilding costs and premiums keep changing, so it’s worth updating the comparison each year rather than deciding once.

Contact [email protected] for any questions or corrections.