Are you in about to buy a home and are wondering why your lender is requiring you to get homeowners insurance?
This is an excellent question to ask and the answer is simple. Homeowners insurance protects the lender’s asset (house) should anything happen to it like a fire or disaster
Lenders naturally want to make sure that borrowers are going to be able to pay back their mortgage loans.
A homeowner’s insurance policy is the best way to make sure that a borrower is able to meet their financial obligation to the lender because if the home is damaged by fire or something else, the insurance will cover it, and the borrower will be able to pay back the lender.
When Is Homeowners Insurance Not Required?
In some cases, homeowner’s insurance may not be required if you’re purchasing a condo because some homeowners associations (HOA’s) may have sufficient enough coverage that the buyer doesn’t have to get additional homeowners insurance.
Another way some buyers may not be required to pay for homeowner’s insurance is if the buyer is planning on paying cash for the home, although homeowners insurance is still recommended because a homeowner should want to always ensure their house.
What Does Homeowners Insurance Cover?
Homeowners insurance covers the owner should their home be damaged by fire or another disaster.
This form of insurance protection covers the entire structure and belongings inside of the home.
What most people don’t know is that homeowner’s insurance does not cover the homeowner in the event of a flood or earthquake.
As a homeowner, it’s best to have homeowner’s insurance, flood insurance and earthquake insurance just to make sure that you will be thoroughly protected if a disaster of any shape or size strikes your home.