HOMEOWNERS INSURANCE AND MORTGAGE

Homeowner’s insurance is typically an important requirement for obtaining and maintaining a mortgage in California.

This is why lending institutions in California wish to keep their investment protected, and they know just how financially devastating home damages can be.

If the mortgage holder is not insured and a tree falls on their home during a storm, the out-of-pocket cost to repair that damage is out of budget for most.

If a homeowner has difficulty paying for repairs, he or she will probably no longer be able to repay his or her monthly loan repayments, along with temporary housing, food, transportation, and other necessary living expenses.

This may result in the lending institution being stuck with the loan if the mortgage holder loses their ability to pay for their home.

Why is Homeowners Insurance Required?

By requiring homeowner’s insurance, lenders know that the home is covered should the worst occur.

A fire, a windstorm, or any sort of catastrophe may do its damage, but the insurance provider will cover these damages so that the homeowner may continue to afford to pay their monthly mortgage payments.

However, what about when the mortgage is up? After paying that final payment, a homeowner may choose to adjust their homeowner’s insurance in order to better suit their needs and budget.

In addition, there are ways to reduce the cost of insurance by making some repairs in your home. Talk to your insurance agent about how you can reduce your premiums.

Why Make Adjustments?

Mortgage companies will typically require a more comprehensive policy covering all sorts of situations and damages just to make sure that their investment is protected.

While it’s important to always have homeowner’s insurance covering your property, some homeowners may decide to cut down on some of these coverages once the home is fully paid off.

If you do plan to adjust your homeowner’s insurance policy after the completion of your mortgage, a few considerations to make are:

1.    Make sure your mortgage is paid in full – Making your final home payment may not necessarily mean your mortgage has been completely paid in full. Interests, escrow needs, taxes, and additional fees may be included in your mortgage and still need to be paid.

Once you believe your mortgage has been fully paid, make sure to check with your lender to ensure there are no additional fees or costs you may be missing.

2.    Remove the bank from your policy – With the bank listed on your homeowner’s insurance policy, they may still be entitled to some of any settlement you receive.

Before adjusting your policy, and as soon as you’ve paid off your mortgage completely, remember to remove your lender from your policy.

3.    Take a good look at your policy – With the help of an insurance professional, take a deep dive look at your policy to really gauge what you want to adjust.

This ensures you have a policy that continues to work with and for you.

Your Policy Adjustment Questions Answered

Speaking to a professional should be your first step when you consider making an adjustment to your homeowner’s insurance policy. If you’re interested in adjusting your coverage after you’ve paid off your mortgage, contact us at Panorama today.