Why Your Mortgage Company Requires Homeowners Insurance

When you purchase a home, the bank, the mortgage company, whoever's doing the lending, or whoever's giving you the money to purchase that home, they're going to require homeowners insurance.

Now, some people go about purchasing homeowners insurance, and they don't think twice about it.

We have loan officers and mortgage brokers throughout the entire country who send their clients to us. These are great partners of ours, and we're blessed to work with them.

When they send their clients over to us, many of them ask "Why," and it's often in passing. They'll just ask, "Why does the mortgage company require us to have homeowners insurance?"

And the answer is to protect the investment of that mortgage company.

the value of your mortgage

The minimum homeowner's insurance, in terms of how much dwelling coverage you need, is often attached to what you owe the bank.

Now, that doesn't mean that's what you should insure your home for. Let's be very, very clear about that.

The minimum the bank will accept in terms of homeowners insurance is very, very rarely equal to the amount of insurance coverage you should actually have.

And that's because, one, it is about the value or the remaining balance on your mortgage. That's what the mortgage company cares about, getting paid if your house burns down.

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the replacement cost of that home

It is also about the replacement cost of that home. The replacement cost of that home is what it's going to actually take, the bricks and sticks, the real dollars to put your home back up if you have a fire.

And oftentimes, after you've put a down payment down and you've negotiated, if you've done a good job negotiating the price of your home, what you pay isn't always the same.

And oftentimes, it's less than what it would actually cost to rebuild the home. And you know you got a good deal in many cases for that.

This is very, very true for any older homes, especially if you want that older home rebuilt the same way that it came.

But in that scenario, that's why they require it because the mortgage company's going to get paid first.

If your house burns down to the ground and you decide not to rebuild, they're going to get their money first, and they want to make sure that you have enough. That's why they require it.

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The Rub

My point in sharing this with you is one, just to give you that bit of information.

But two, to make sure that you don't make the mistake, especially if you try to do it yourself, of going online and purchasing homeowners insurance somewhere direct and not buying enough coverage.

That if you decide to purchase coverage just based on what the balance of your loan is, you very, very likely will not be able to rebuild your home. And that's why it's worth calling a professional.

This is where we come in at Rogue Risk.

If your current insurance professional has never addressed issues like this with you before, I’d encourage you to reach out to us today.

• You can call or text us at 518.960.6600
• Click here to contact us via email.

I look forward to introducing you to a new way of viewing your insurance program.

Thank you,

Ryan Hanley