When Lender Arranges Homeowners Insurance That Fails The Homeowner

Your Insurance Agent’s goal is to protect you, your money and help you financially recover from an unforeseen disaster. A Mortgage Lender’s goal is to secure a home loan the borrower desires, often for the largest eligible amount and most favorable rate terms possible. To that end, however, some lenders will often recommend cheap insurance options that could leave the new homeowner “Homeless” long after the loan document ink has dried. This often happens on home loan refinances, too!

Case in point. My last blog post (sorry, been a little busy) from January 6, 2021 addressed “When Premium is Least Important“. Update to today, the home that burned down on January 5, 2021 is STILL unfinished, unoccupied and stands abandoned. What we’ve discovered happened is, in order to meet certain debt-to-income ratios and qualify the buyers for their new home loan, the lender recommended the borrowers secure a cut-rate home insurance policy lacking the necessary reconstruction cost coverage to rebuild following a disaster in a current day market. Well, disaster struck only days after closing and the result – the new Homeowners have been living out of a suitcase in an apartment for the past 2-1/2 years. Their lender arranged and recommended they go with a cheaper Homeowner’s Insurance policy for its low rate in order to fit within the necessary borrower’s ratios. Sadly, the new owners still haven’t moved into a home they purchased 2-1/2 years ago and are struggling to scrape up the necessary monies required to finish rebuilding their new home.

PLEASE Be Protected, Not Surprised! Don’t buy your insurance from a Lender and don’t finance anything with your Insurance Agent. Work with professionals of integrity, within their specific industry expertise, to avoid financial pitfalls and grave disappointments.