Making a home purchase can be a very exciting experience. But before a veteran begins looking for a home, it is important for him to know the homeowners insurance requirements. Mortgage companies and the VA have specific requirements on loans; before settlement the new homeowner must be aware of these regulations.
Homeowners Insurance Requirements: Protecting Your Property
Obtaining a loan through the VA means the VA approved lender has a guarantee for the payment of the loan in the event the borrower defaults on the mortgage. The purchase of insurance is one of the most important things new homeowners can do for themselves. A home is a large investment for anyone to make. And, as such, it is essential to protect your home from any accidents that might occur. Purchasing homeowners’ insurance is the best way to accomplish this.
All lenders require borrowers to obtain homeowners insurance requirements. To protect the home’s value and the lender’s investment in the property. Insurance ensures the homeowner that if anything happens that would lower the home’s value. The insurance would cover the cost to restore the property to whatever value was in existence. Prior to the incident that caused the devaluation.
Problems with Lack of Sufficient Insurance
Any homeowner who fails to purchase homeowner’s insurance coverage risks losing his or her investment. If the insurance coverage is not sufficient to cover the current value of the home. The proceeds will go to the mortgage company while the homeowner may not receive anything. This is the reason a homeowner must ensure the insurance coverage limits are sufficient. To cover the entire value of any property increases that have occurred within the real estate market.
In some areas, specifically those where natural disasters are quite common, additional insurance may be necessary. If the property falls under what is called “Special Flood Hazard Area,” both the mortgage company and the VA will require the purchase of flood insurance.
Protect Your Property from Disaster
Even if a home is paid-in-full, there is still a need for homeowners’ insurance because accidents do happen. Unfortunately, homeowners’ insurance has become more difficult to obtain, especially in states where things have happened that have resulted in an increase in the numbers of claims. Another problem is VA mortgages may necessitate special coverage that many companies are not willing to provide. For instance, many homeowners’ policies have a “vacancy clause” that comes into the picture if the homeowner is gone for a long time. What happens in this case is some of all the insurance coverage may not cover potential losses which might be incurred. What a specific homeowners’ policy deems as “vacancy” may vary, as will the length of time it covers, so the homeowner must be certain to know and understand the terms of the policy.
Some policies also fail to cover what they call “natural disasters” unless addendums to cover those items are defined specifically. This includes damage from military action, floods, hurricanes, tornadoes, and even lightning. The best protection a homeowner can provide is knowing the exact terms of insurance coverage on the property.