Do I need homeowners insurance if my house is paid off?

Complete Guide to Homeowners Insurance on a Paid-Off Home

Why This Question Matters for Colorado and Utah Residents

While paying off your mortgage is a momentous milestone, deciding whether to keep homeowners insurance remains a critical choice—especially in regions like Colorado and Utah, where unique hazards and rising costs put your investment at substantial risk.

• Frequent Severe Weather: Colorado leads the nation in hail claims, and both Colorado and Utah face wildfire threats. Without insurance, one storm can erase decades of home equity in hours.
• Rising Costs and Claim Frequency: Colorado premiums average $3,320/year, with major events like the Marshall Fire and Fort Collins hailstorms causing billions in losses. Utah, while less costly, still faces increasing wildfire and theft risks.
• Regulatory Trends: Laws like HB23-1174 in Colorado create new protections, but there’s still no legal insurance requirement once your home is paid off. Yet, 97% of local experts caution going without coverage exposes you to catastrophic out-of-pocket costs.

What Most People Get Wrong

Many homeowners in Colorado and Utah believe that if their home is paid off, dropping coverage is a money-saver—until a hailstorm, fire, or major liability claim proves otherwise. They also underestimate the increasing costs of property repairs and rebuilding in the mountain West, where construction inflation has averaged 11.8% annually.

Another common mistake is assuming “disaster won’t happen to me”—even as local claims data shows nearly 1 in 15 homes files a claim yearly, often for far more than imagined.

The Complete Picture

Even without a mortgage mandating insurance, homeowners coverage is your financial shield. If a fire, hailstorm, or theft causes major damage, insurance carriers typically cover tens—or even hundreds—of thousands of dollars after your deductible. Without coverage, you shoulder the full financial burden, which could mean liquidating savings, securing loans, or even selling your home. Local stats show average storm and fire claims easily exceed $10,000–$350,000 depending on severity. Add liability risks (like a visitor slipping on icy steps), and potential legal bills or settlements can reach $50,000 or more. Keeping coverage also ensures funds for temporary housing after disasters—a crucial but often-overlooked benefit. In high-risk areas (like Boulder or fire-prone canyons near Fort Collins), some specialty policies and new FAIR Plan backup options may apply, but nearly every expert recommends securing traditional homeowners coverage for long-term stability and peace of mind.

Making the Right Decision for Colorado and Utah Residents

Question 1: What risks am I personally exposed to without insurance?

Review your home’s location, local hazards, and financial situation before dropping coverage:

• Could you comfortably pay $30,000–$350,000 out of pocket if your home was damaged or destroyed by fire, hail, or wind?
• Are you willing to self-insure liability claims that could involve medical bills or lawsuits?

Question 2: Can I rebuild or repair my home with current savings?

Factor in the true costs of home repairs in Colorado and Utah—construction, materials, and code upgrades are at an all-time high. Recent local claims show:

• Roof replacement in Fort Collins: $15,000–$40,000
• Wildfire rebuild in Boulder: $350,000+

Question 3: How might local risks and laws change in the future?

Both states are seeing more extreme weather and evolving insurance markets. Colorado’s upcoming FAIR Plan and new laws like HB23-1174 may create options for hard-to-insure properties, but costs and coverage gaps remain substantial. Proactively consult a FoCoIns advisor for ongoing review—needs change with age, location, and local climate realities.