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This type of insurance
is commonly referred to as the "homeowner's policy". It protects
you, the insured, against loss which could be sustained in the future
as a result of fire, theft or other mishap. Because a serious loss
could reduce the value of the property below the amount owed to
the lender, the lender has a right to be added to your homeowner's
policy as a party who may be entitled to a portion of the proceeds
in the event of a loss ("loss payee"). If you are financing your
property with a lender, it will ask that you provide evidence that
its name has been added to your homeowner's policy for this purpose.
Assuming your premiums for the current year are paid, you will not
incur any additional cost since your annual premium pays for full
coverage. Your lender will require you to obtain a binder from your
insurance agent before the closing. You must also obtain a one year
paid receipt with the binder.
Portions of
this page are reprinted with the permission of CATIC.
The information
you obtain at this site is not, nor is it intended to be legal advice.
You should consult an attorney for individual advice regarding your
own situation.
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