Your Lender Mandates Homeowners Insurance

November 06, 2020 by Dan Green

Mortgage lenders require all homeowners to have homeowners insurance.

Homeowners insurance is a contract that pays cash to you when your home gets damaged so you can pay for repairs. And, that’s the key part of why lenders requires your policy.

Damage to your home reduces its value and your home’s value is the basis of your mortgage loan approval.

It’s your collateral in the loan it sets your rate and it set your terms.

You have insurance so your home can be rebuilt in case of a disaster, but something to keep in mind: homeowners insurance is limited to specific perils. It covers damage from smoke and fire, and from hail and most windstorms.

It specifically doesn’t cover earthquakes. And, it doesn’t cover floods.

Damage from disaster types like those is paid out-of-pocket and you probably won’t want to be on the hook for it.

One inch of flood water can cross twenty-thousand dollars to fix and replace. And, an earthquake can shake your house to its roots.

So consider additional insurance to protect your home and your bottom line. Insurance policies cost dollars, yes, but they’re way cheaper than paying to replace your stuff.

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