There is no law that says you must buy homeowners insurance if you own a home, according to the Insurance Information Institute (III). But very few home buyers can pay cash in advance for such an expensive purchase. Most people will need to finance most of the costs of a home, and that means going to a mortgage lender. As a condition of getting a home purchase loan, a mortgage lender will require you to insure homeowners insurance throughout your mortgage.
Why mortgage lenders demand homeowners' insurance coverage
When a mortgage company borrows hundreds of thousands of dollars For a home purchase, the home serves as collateral for the loan. Lenders want to protect their investments if a disaster destroys or seriously damages the property. For this reason, they insist that borrowers who buy a home have the protection of a homeowner's insurance policy that will pay for the house to be repaired or rebuilt in a covered loss.
Insurance coverage you need on your home to satisfy your mortgage Lender
Your lender may require you to insure homeowners insurance that provides protection against fire, hail, lightning, hurricanes, tornadoes and other natural disasters, depending on your area. If you live in a flood zone, your mortgage company will also require flood insurance, which is not included in a homeowner's insurance policy, but can be purchased separately. If you live in California or another area that is prone to earthquakes, your lender may require you to purchase separate earthquake insurance.
Homeowners Insurance protects you as well as your lender from loss
If you are like most people, your home is one of the biggest investments you will ever make. A disaster, such as a fire, tornado or hurricane, can destroy your home and the belongings it contains in a matter of hours or less. Even after your mortgage has been paid ̵
A Homeowner Policy Can Help You Protect Yourself from Liability
A standard homeowner policy can also protect you from liability if someone else is injured on your property, or if you, a family member or even a pet accidentally injures property belonging to another. For example, your homeowners liability insurance would apply in the following scenarios:
- Your teenage daughter invites over a friend who travels on a vacuum cleaner cord and falls and breaks her wrist.
- A large tree limb in your garden falls on your neighbor's property and causes structural damage to his or her fence.
A home is a significant asset. If you own a home, you need homeowners insurance, not only to satisfy your lender, but also to protect your significant investments in the purchase and maintenance of the property. Our experienced agent can help you get the best deal on a homeowner's insurance and any extra coverage you may need to protect your home.