In most cases, you’ll be asked to provide proof that you’ve prepaid one year’s worth of coverage before the lender will set closing. The lender holds a lien on the property until the mortgage has been paid off. To safeguard their interest, lenders want financial protection in the form of a home insurance policy to pay for the cost of rebuilding your home, should a disaster occur. A standard homeowner’s insurance policy generally protects against:
• Fire and lightning • Damage from hail and windstorms • Theft and vandalism • Smoke damage
• Falling objects, like tree branches • Damage from the weight of ice, snow, or sleet • Frozen plumbing, heating, AC, or other household systems
• Vehicles (and even aircraft) — not the vehicle itself, which is the object of auto insurance, but damage from vehicles — e.g., in the event a car runs into your home. • Riots or civil commotions • Explosions • Flood (depending on the cause) - you may also be required to purchase flood insurance if the home is determined to fall within a federal flood plain. Homeowner’s insurance policies also generally include coverage for liability, personal belongings, other structures on your property like carports and fences, and additional living expenses
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