Homeowners insurance protects you in instances where you have damage to your home, stolen possessions, and when others on your property are insured and attempt to take legal action against you. While not legally required per se, it is still a must. This article helps answer the question, is homeowners insurance required?

When Is It Required?

Mortgage lenders require homeowners insurance, not the federal or state government. In fact, if you’ve paid your mortgage in full, you don’t have to have homeowners insurance at all.

When it comes to mortgage lenders, many will require you to show proof that you have a homeowners policy before allowing you to close on your mortgage.

Why Do Mortgage Lenders Require It?

Like any case where an insurer or lender is involved, they need to ensure they will get something in return from you. When you’re enrolling in any insurance policy, the company assesses you for risk.

Mortgage lenders have a financial interest in the property while you still make payments. That’s why having homeowners insurance stops becoming mandatory after you have paid your mortgage off.

What If I Lose My Homeowners Coverage? 

You can lose coverage in a couple of ways:

• Missing monthly payments
• Filing too many claims in a short period of time

If this happens, your lender can purchase the insurance for you and then charge you for it, but this is up to your mortgage lender, so missing payments for the sake of having your lender purchase it on your behalf is not an ideal strategy.

Your lender may also purchase force-placed insurance, which only covers the home itself and not your personal possessions or legal fees. However, this type of insurance will be up to two times more expensive than your lost coverage.

Your insurance company is required to inform you of your coverage loss 30 days ahead of time. They’ll send a notice, and at that time, you’ll be able to search for another homeowners policy from a different insurer.

If you face repeated policy denials, you can get a state-sponsored plan known as the Fair Access to Insurance Requirements (FAIR) plan. These policies are for applicants deemed as high-risk. Like other alternatives to homeowners insurance, it will be more expensive with fewer choices regarding your home’s coverage.

We Have You Covered

At Magnolia Insurance Agency, we will ensure that you get the best homeowners policy for your insurance needs to protect you when disaster strikes. Call us today at 770-213-5171 or contact us online to learn more about how we can help you with your insurance needs.

Homeowners Insurance / By Magnolia Insurance Agency