Homeowners Insurance can be a very complicated thing. So let me give you a simple explanation– What exactly IS homeowners insurance?
When you buy your dream home and mortgage it, you’re getting both the largest asset of your life, but also your largest debt at the same time.
That’s why you need insurance on it.
Homeowners insurance is an insurance policy that pays out cash when a home is damaged by weather, or fire, or other means. That’s why it’s also known as hazard insurance. It’s there to help homeowners repair or revamp their homes, and restore them to their full market value.
Homeowners insurance protects your biggest asset by helping you rebuild after a problem or emergency and, in doing so, it also protects your biggest debt.
Remember: your mortgage loan is given to you on the basis of what your home is worth, so if your home’s worth takes a hit because of damage from a storm, it’s not just you who takes a loss — your lender loses, too.
Imagine if you had to pay for a leaky roof from your savings account. How would that affect your budget, and your ability to make your mortgage payment?
And, what if you couldn’t afford the fix right now and had to delay it a few months? What other damage would occur to your home, and how might that cause its value to fall.
Scenarios like these are just some of the reasons why mortgage lenders require home buyers to get homeowners insurance.
Homeowners insurance does more than protect your number one asset — it also protects your number one debt.
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Today’s home buyers have 8 percent more purchasing power, and they’re asking mortgage lenders to approve more mortgage applications.