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Insurance Requirements for Mortgage Borrowers

Real estate Q&A: Mortgage requires homeowner to have insurance

Aug. 27, 2015

By GARY M. SINGER Sun Sentinel - Tribune News Service

Exactly what kind of property insurance is required by law if I have a mortgage? Every year or two, the requirements and costs seem to go up, and now the amount of coverage my lender wants is out of line with the value of my home. Also, can the lender force me to include the insurance payment with my monthly mortgage payment?

When you borrowed the money from the bank, you contractually agreed to maintain insurance on the property. If you fail to keep the required insurance, your lender can take legal action against you and even can foreclose.

You will need to keep hazard insurance and flood insurance if you are in a flood zone. Generally, you're required to have enough insurance to pay off the mortgage in the event of a total loss. The lender would get paid before you do, so you should have coverage for the value of the property if the house is worth more than your loan. You also may be required to have insurance on the contents of the home and liability insurance in case a visitor is hurt.

Most mortgages require the borrower to pay the monthly portion of the insurance to the lender along with the mortgage payment. The insurance portion is held in a special escrow account and paid to the insurance company annually. Sometimes the lender will waive this requirement as long as you are paying both your mortgage and the insurance on time.

You also need to make sure your insurance renews every year and that a copy is sent to your lender. If the lender doesn't think you have insurance, it will buy a policy for you, and you won't like the price.

If you think the amount of insurance that your lender requires doesn't match the value of the house, you can follow a procedure to prove the true value. This usually requires getting an appraisal, but there may be different requirements, so check with your lender first before taking action.

About the Writer
Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County (Florida) Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program.

The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

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