If you’re looking forward to owning a new home in Texas, then chances are you are aware of some of the requirements lenders may present prior to green-lighting any type of home loan. These requirements often include mandatory homeowners insurance. It’s something that some would see as an unnecessary expense, but it can be the one thing that stands between you and financial ruin in case something happens to your home.
Homeowners insurance is designed to protect both the homeowner and lender against financial loss from a variety of hazards that may have a negative impact on the home’s value. In most cases, a mortgage agreement will include a home insurance policy as a mandatory requirement to be met before your lender will fund a loan. The total coverage of the policy must be above the minimum amount needed to rebuild the home and the total amount of the mortgage. If the home is located in an area designated as a disaster zone or an area prone to floods, hurricanes or earthquakes, additional coverage that protects your home against these scenarios is also mandatory.
The reason for this is actually quite simple – as the house itself serves as collateral, the last thing the lender wants is to lose it to a fire, tornado or any other type of catastrophic event or action. With a home insurance policy in place, the lender will not be at a significant financial risk if the home is destroyed in a fire or washed away in a flood. The home can be rebuilt and the lender will retain its collateral.
As you look for a solid home insurance policy, it’s important to compare as many quotes as possible to find the most affordable policy available. Through our website, you can gather live comparative quotes online as well as collect additional information concerning your coverage options. If you’re looking to save money on your insurance policy, you may want to consider carrying a higher deductible in exchange for lower premium costs. For reference, some lenders limit the highest deductible to two percent of the home’s total value.