No Company Will Insure My Home And My Lender Requires It. Will The Bank Purchase Coverage? Will It Cost Me More?
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Asked November 7, 2011
Lenders typically require you to carry insurance on the home. At the very least, they want to see their investment protected, which can be done using a type of home insurance called mortgage insurance. This coverage pays out to the lender or mortgage holder if the home is lost. It covers the structure but does not cover any personal property or provide liability insurance.
If you are not able to get a standard homeowners policy through traditional insurance channels, you may have to buy coverage through a high-risk "pool." This is common for flood insurance, but if the risk of disaster is too high it may be the only kind of insurance available. Ask your neighbors if they have had the same problem and how it was resolved, or contact your state department of insurance.
At the very least, your home needs to be insured enough to cover the lender's interest, your own investment, the personal property you have at the home and any liability claims that may be filed against you. In most cases, this coverage is included in a standard home insurance package, but they can all be purchased separately if necessary. In fact, your personal property protection under a home insurance policy is not usually high enough to cover all of your belongings anyway.
If your bank or lender buys the mortgage insurance on your property, it will probably cost you more than if you secure the insurance yourself. Remember, the lender cannot tell you where to purchase your insurance, but if they buy it for the home they will use a partner company and pass the costs directly on to you. The best option is to find your own insurance company as soon as possible and switch away from a lender selected insurer. It will save you money, provide more complete coverage and give you more freedom in negotiating your policy.
Answered November 7, 2011 by Anonymous