The Facts You Need To Know About Home Insurance
Home insurance, also called homeowners insurance or hazard insurance, is a type of policy that covers damage to residential homes and the contents within them. These policies are typically referred to as multi-line policies, as they cover both property and liability claims. This means that your monthly insurance payment, also called a premium, will go partial towards liability insurance and partially towards property insurance.
Why Do You Need Home Insurance?
There are many good reasons you should consider purchasing insurance for your house. Let’s take a look at the most common reasons below.
- To satisfy your mortgage lender’s requirement for the duration of your mortgage loan.
- To cover the costs of your home and your personal property in the event it is damaged or destroyed.
- To cover the costs of legal claims in the case someone is injured or someone’s property is damaged while on your property.
- To cover the costs of any damages or injuries that occur anywhere adjacent to your property. (ie. a tree limb from the tree on your property falls on a car parked on the road in front of your house)
If something were to happen to your home, it’s very unlikely that you would be able to pay the money out of pocket to rebuild it. Because homes are such large financial investments, it’s imperative for almost all individuals to have an Youi Home Insurance policy to protect against drastic financial loss in the future.
Why Do Mortgage Lenders Require Home Insurance?
Mortgage lenders are forking over a large sum of money up front to you, the home buyer, so that you can purchase your home. They collect their investment dividends through your monthly premium payments. If a mortgaged home where to be destroyed due to a natural disaster or a manmade disaster, the homeowner is unlikely to still pay the mortgage premium.
This provides a large financial loss to the lender for not only their initial investment amount but for all the interest they didn’t get to earn yet from the monthly premium payments. To avoid this problem, most mortgage lenders require that the home buyer has insurance. This way the mortgage lender can collect the fees the insurance company will pay out to compensate for the damage to the home.
In most cases, the mortgage lender will include the monthly home insurance payment in your total mortgage premium. This is meant to ensure the mortgage lender that you are indeed holding home insurance coverage on the property.