Did you know that if you take out a mortgage, you may be required to insure the purchased property? Sometimes, the lender may even take out home insurance and charge the borrower for it. Let’s delve into why home insurance is a requirement. If you’re seeking top-notch home insurance policies and agents serving Palm Coast, FL, consider working with the team at All Counties Insurance Agency & Traffic School.

The Necessity of Home Insurance

Mortgages typically offer more affordable interest rates than personal loans, credit cards, and many other types of loans. This is mainly because a mortgage is backed by collateral, such as the purchased home. If a borrower falls behind on payments, the mortgage company can take possession of the house and sell it to recover the loan.

Therefore, the property’s value is of significant concern to the lender. If the home’s worth is less than the loan amount, the lender’s risk increases as they won’t be able to recover as much from a sale. For instance, if a property is damaged during a tropical storm, the home will lose value, and the lender’s risk could increase. However, if the house is covered by the right insurance policy and the damage is repaired, it will protect the home’s value, thus decreasing the lender’s risk.

Ultimately, banks and mortgage companies aim to reduce risks, so they require home insurance to protect themselves. If you’re looking for insurance agents serving Palm Coast, FL, contact Counties Insurance Agency & Traffic School. We’re always eager to assist homeowners.