Catastrophic events happen every day. The Insurance Information Institute states a fire and lightning event, on average, can cost $50,315 to repair. This information is the average claim from 2012 through 2016. It is the most costly type of claim.
Consider for a moment what this means to a mortgage lender. A home catches on fire. Suddenly, it has smoke, water, and fire damage throughout it. Is it still worth what the borrower owes? Sometimes this is not the case. But, with homeowners insurance, the lender does not have to worry.
Protecting Its Interest
If you have a mortgage on your home, your contract with the lender likely states you must maintain home insurance. You agree to this when you accept the loan from the lender to buy the home. Lenders require it because it helps protect their investment in your property.
Consider this. The lender is giving you $150,000 or more. They are trusting you will pay it back. They secure that trust with the home. If you stop making payments on the home, the lender can work to take it back. Or, they may be able to force the sale.
Now, let’s say lightning strikes the home. A fire starts. The entire structure is a loss. Will you keep making payments on this home if you cannot make repairs? Is it logical to keep paying for something you cannot rationally use? The lender can no longer force the sale of the home to recoup their money. It is not worth it.
But, with home insurance, the lender’s interest has protection. The insurance company will repair the home. They may even pay to rebuild it. In this event, the lender has first claim to the payout for the property from the insurance company. This applies if you do not decide to rebuild the home. The insurance company still gets the funds to repay the debt you owe. It'll protect their investment, while also helping you get out from under the cost of the lost home.
When shopping for homes, always factor in home insurance. It is a requirement in most cases. Even if it is not, it is well worth the investment. All types of unexpected events can occur. This can make it hard for you to recoup your investment in the home as well.
Homeowners and lenders with proper insurance can ward off financial loss. Mortgage lenders will require identification and proof of insurance on an ongoing basis. With it, your lender has assurance their investment is safe even if an accident damages the home.
If you need Oklahoma City home insurance, look no further. Call ECI Agency Inc. at (405) 373-2977 for a fast, free policy quote.