What is home insurance?
Home insurance pays for losses and damage to your property if something unexpected happens. Like a fire or burglary. When you have a mortgage, your lender wants to make sure your property is protected by insurance. That’s why lenders generally require proof that you have home insurance.
Do I need it?
Standard home insurance doesn’t cover damage from earthquakes or floods, but it may be possible to add this coverage. It is also sometimes referred to as “hazard insurance”.
Many homeowners pay for it through an escrow account as part of their monthly mortgage payment. You make the payments to the lender, and the lender holds the part of the payment that is for insurance in an escrow account. Then, when the bill is due, the lender pays it from the escrow account.
How to get Home Insurance?
It’s usually a good idea to do your research about how much it costs. You can shop separately for it and choose the provider and plan that is right for you.
If you don’t have it, your lender is allowed to buy it for you and charge you for it. But your lender must give you advance notice. If your lender buys it on your home because you did not keep up your home insurance, that may only cover the lender, and not you. It also may be more expensive than what you could buy on your own. Cheapest Home Insurance Companies in USA
Does it cover forest fires?
Your policy may cover fire damage from forest fires, but you need to check your policy’s coverage and limits. Some companies may charge extra or exclude fire damage in high-risk areas.
I suggest you contact your company to make sure your house is adequately protected from fire damage and that covers forest fires.
What is mortgage insurance and how does it work?
Mortgage insurance lowers the risk to the lender of making a loan to you. So you can qualify for a loan that you might not otherwise be able to get(1).
Typically, borrowers making a down payment of less than 20 percent of the purchase price of the home will need to pay for it. It also is typically required on FHA and USDA loans. It lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get. But, it increases the cost of your loan. For More Info look at How Home Insurance Companies work.
It protects the lender, not you. No matter what kind, protects the lender – not you – in the event that you fall behind on your payments. If you fall behind, your credit score may suffer and you can lose your home through foreclosure.
