I have a mortgage, does anything happen if I lose my home insurance coverage?
UPDATED: Oct 8, 2013
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Asked October 8, 2013
If you have a mortgage on your home, having insurance could be extremely important. Some mortgage companies make having adequate insurance a condition of the mortgage and can begin foreclosure if you fail to keep the home insured. This is not always the case, and other mortgage companies protect themselves with mortgage insurance built into your monthly payments.
Mortgage insurance is not the same thing as home insurance. Many times, you lender will require you to carry mortgage insurance, often bundling it into the mortgage payments. If, for example, the house burns down, mortgage insurance will pay directly to the lender for the value of the loan. Mortgage insurance is designed to protect the investment of the lender, but it will not pay anything to the homeowner.
If your mortgage is tied to the insurance for your home, the insurance company will usually notify the mortgage company when the policy is being terminated. The mortgage company would then give you a period of time, usually 2 weeks or less, to prove that new insurance has been acquired. After that period, the mortgage can begin steps to either forcibly insure the home or foreclose on your possession of it.
Look for ways to save on your home insurance. A good place to start is by putting deadbolt locks on your doors. Follow up that up with burglar bars on all accessible doors and windows. If you have a yard, put a fence around it. Finally, install a monitored alarm system. Each of these things will net you a small discount, and they can be added together to save even more money.
To protect yourself, avoid filing more claims than are necessary. If the total value of a claim is only a little more than the deductible you have to pay, go ahead and pay for the whole claim out of pocket. It might cost you a little in the short term, but keeping the number of claims you file to a minimum will benefit you in the long run, not just on home insurance but on all of your liability insurance policies.
Answered October 8, 2013 by Anonymous