Why Home Insurance is Required on Mortgages

Lenders across the nation require home insurance if the home is mortgaged. Homeowners in Youngsville, NC, like other locations, have different options they can choose from, but the lender must approve the coverage before they lend the money. Those shopping around for a new home or looking to build must understand that insurance protects the lender and not the buyer. Only if the house is paid off will the insurance benefit the owner.

The Lender Owns the Home

Insurance is required in mortgages to protect the collateral, which is the house and property. The homeowner’s name may be on the paperwork, but the bank or lender technically is the homeowner until the mortgage is paid off.  

The underwriting in the insurance policy states all the damages covered to keep the home intact throughout the mortgage payment arrangements. The mortgage’s time frame is agreed upon by the parties involved at the time of the closing sale. This time frame usually lasts 15-30 years. 

The Demand for Homeowner’s Insurance

In the event of a loan default, the house returns to the lender during the foreclosure process. Then, they will sell the place to get a return on their investment. The insurance guarantees that the home remains at high standards to sell at top dollar. 

The premiums are paid by the purchaser, which is usually in the form of escrow. If claims are filed for repairs or replacements, the homeowner must come up with the required deductible. The lender may also demand that all repairs are reported. 

Holmes Insurance Services Can Assist You 

At Holmes Insurance Services, we are prepared and equipped to answer all your inquiries and guide you through the underwriting process. Contact us with any questions or concerns about getting homeowners insurance in the Youngsville, NC metroplex and surrounding areas.