Why do banks require home insurance?

…and why is it so expensive?

When buying a house, banks will often require you to attain an insurance policy to protect the property. This is because you technically don’t own it. By granting credit to buy a house, banks are introducing themselves in an investment; over a period of 30 years or more depending on your mortgage contract, you will be subjected to pay back said credit along with set interest fees. Over this time, the house still belongs to the bank, so they will need to insure the property against any damage.

Often times, they will offer a more costly policy that can change depending on your loan contract and whether the property is under insured or not. Banks can force-place insurance policies if the individual has not properly insured the property. The bank must provide two notices before force-placing insurance; to do this, banks must ask you to provide proof of insurance (such as a copy of the declaration page from the policy) and advise that if you do not have insurance, the bank can purchase the insurance on your behalf. The premium on this insurance will usually be much more expensive than the cost of a policy you can purchase yourself. The bank can charge you for the cost of the insurance premiums.

Luckily, here in Griffith Insurance & Financial Services, we offer a wide range of insurance providers that —depending on property size, previous claims, and owner compliance—can assure you the best broker rates and service at your disposal!

Call us now! at 323-564-9112 or request a quote here.