Does a Mortgage Company Require Home Insurance?
You are buying your dream home. You’re excited about all of the potential it can bring into your life. After all, this is something you will own. But before you sign on the dotted line, your lender asks you about home insurance. Do you have it? Do you have enough? Mortgage lenders want to be sure you have the protections in place to keep their investment in your property safe. That’s why nearly all lenders will require you to get a home insurance policy that meets minimum requirements to cover what they are putting into your home. Find out what happens if you don’t have home insurance.
How Much Coverage Do You Need?
Every home is different in terms of value. Mortgage lenders want to know that your property is secured at least through their level of investment, or how much you’ve borrowed. However, this is a bare minimum. While your policy needs to cover the amount to replace your home and the total mortgage amount, this is rarely enough to fully protect you from loss. Remember, you have belongings to protect as well. The lender wants to ensure the home can be rebuilt to the same or better value than it is investing, but you should also ensure ample contents coverage.
What Types of Coverage Do You Need?
Most mortgage lenders require comprehensive home insurance plans. These cover homes from many types of perils such as fires and weather events. However, a lender may require additional coverage options as well. This depends on where you live and what your policy excludes.
For example, many lenders require additional hazard coverage if your property is located in an area that is a high risk for natural disaster. This may be coverage for earthquakes, hurricanes or flooding. These are generally not a part of your basic homeowners insurance policy. But you can often obtain the appropriate coverage by adding on a policy endorsement.
Also, note that the lender is often named the payee of the insurance plan should an event of significant loss occur. This makes sure that if the home is a total loss, the insurance company is given the funds necessary to cover your investment. If you are unsure if you have the right type or amount of home insurance to meet your mortgage lender’s requirements, contact your lender to find out. Don’t risk not having ample coverage in place.
Are you covered? Call your Bay Area insurance agency at (925) 737-1560 for more information on home insurance.
Also Read: 5 Important Facts about Earthquake Insurance