Benefits Of Home Insurance For NJ Homeowners

One of the many considerations when buying a home is procuring insurance. Unlike optional renters insurance, lenders have strict guidelines on home insurance NJ residents are required to follow. The insurance is in place to protect the lender as well as the homeowner. Home Insurance NJ

Securing a Binder

Prospective homeowners must secure a binder with a reputable insurance agent or company. The binder is generally sent to the lender before a closing date can be set for the loan. To satisfy the lender, the amount of the policy should be at least enough to cover the amount being borrowed. For optimal protection, the amount of the policy should be sufficient enough to fully replace the dwelling and contents.

Why Lenders Require Home Insurance

Mortgages are secured by real property, meaning that if the borrower defaults on the loan the lender can take the collateral, or the home, to recover the balance of the loan. By maintaining home insurance NJ homeowners are providing security to the lender and an assurance that if the home is damaged there will be funds to repair the damages. If the damages were not repaired and the home was left in a compromised state, the value of the home could drop below the minimum amount needed to cover the balance of the mortgage, leaving the lender without means to recover the investment.

Although homeowners’ insurance is not required when there is no mortgage involved, it is advisable to keep coverage in place in case of an unplanned event. Weather, fire and accidents damage or destroy numerous homes each year. Without home insurance NJ residents are liable for repairing or replacing the home with their own funds. Homeowners’ insurance not only protects lenders but also protects homeowners in times of need.

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