TUESDAY, MARCH 14, 2023
Owning a home is a big responsibility that comes with risk. If your property is damaged or destroyed, you could be responsible for high out-of-pocket expenses on top of your monthly mortgage payments. For this reason, most mortgage lenders will require you to purchase a homeowners insurance policy before they finance your loan.
Will My Mortgage Lender Choose My Home Insurance Company?
Most mortgage lenders will let you select the home insurance company for your property. As long as you purchase enough home insurance to meet your mortgage lender’s minimum coverage requirements, you can likely shop around and compare multiple insurance companies without too many stipulations from your lender.
How Much Home Insurance Do I Need for a Mortgage?
Although specific mortgage requirements may vary with numerous factors (e.g., your location, building codes in your area and your home type), your mortgage lender will generally require you to purchase at least enough homeowners insurance to rebuild your house from the ground up if it were destroyed.
In some cases, your mortgage lender may require you to purchase only enough home insurance to pay off the remaining balance of your home. For example, if you bought a $400,000 house with a $50,000 down payment, your mortgage lender may require you to purchase $350,000 of coverage.
Policies may vary, but many mortgage lenders will also require liability coverage. Without liability coverage, you could lose your home—one of your most valuable assets—if a lawsuit alleges you caused third-party bodily injury or property damage. A personal liability policy can help protect you from costs related to such claims.
Additional Home Insurance Requirements
Not all homes experience the same levels of risk. If your house is in an area designated as a high-risk flood zone by the National Flood Insurance Program, for example, you will likely be required to purchase a separate flood insurance policy.
Similarly, some insurers may exclude wind damage from home insurance coverage for certain high-risk coastal homes. If wind damage is excluded from your policy, your mortgage lender may require you to purchase a standalone wind insurance policy to help pay for damages from strong winds.
Finding the Right Home Insurance
We’re here to help you find the best home insurance policy for your needs. Contact Regina Jasak for more information on our homeowners insurance solutions and to get a free home insurance quote.
We have offices in Ludlow, Massachusetts, and Newport News, Virginia.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.
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It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional
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