If you are searching for a home or have found your dream home, you may be wondering if you need to buy home insurance before buying the house.
If yes, then you should know that home buyers buying it using a home loan should buy a home insurance policy.
Home loan lenders also want you to safeguard your home in case if there are some damages of higher volume. Lenders give you an amount in the form of a home loan to fund a home, and you owe them the EMIs.
They also want to ensure that you have enough safety for your home so that they won’t lose if the home gets destroyed.
On the other hand, people who have built or purchased a home without the facility of a home loan don’t need home insurance.
What does the home insurance policy cover?
Before you get to know what home loan lenders need, let’s have a look at what the home insurance policies cover.
A home insurance policy covers damages or losses caused by hail, fire, vandalism, lightning and other perils.
- Dwelling – It pays you to repair or rebuild your house if there is damage caused by a loss such as the fire.
- Personal property – It covers whatever is available in your homes such as electronics, clothes and furniture.
- Loss of usage – This coverage assists you to pay the extra damages if you need to abandon your home. You can enjoy the coverage for some time after it has damaged and while it’s being fixed.
- Liability – If you get sued or get a claim against self or a member of your home, this coverage provides protection. It may have happened because of property damage or bodily injury outside of your property.
- Other structures – There is a provision to cover detached structures which may be sheds, garages or fences.
Home loan companies need minimum coverage, but it may not be sufficient. The loan insurance should pay out a value equivalent to the cost of rebuilding the home.
As your homebuyers’ policy will handle other home owner’s issues, the home insurance scheme is only intended to cancel the lender debt if you lose your home.
In most cases, the lender gets named as the policy’s owner and the settlement is released directly to them than you, the homeowner.
Is the home loan protection insurance compulsory?
Since the amount that the lender gives as a home loan for buying a home is higher, they need a guarantee or assurance on the timely EMIs or repayments. As a result, having a home loan insurance policy helps them have confidence.
Yes, if your home gets damaged, the loan company need not lose out on its repayments. It is where your home loan protection insurance policy is compulsory
If you have already repaid your home loan or have not availed a home loan to buy a house, then it’s not mandatory to get the onboard home loan protection insurance.