FAQ: Why Do I Have to Pay the Hazard Insurance Premium Up Front?
August 3rd, 2009
Categories:Home Buyer Education
The hazard insurance premium, (also known as homeowner’s insurance) is an interesting topic. While homeowner’s/hazard insurance is commonly looked at as being voluntary on the homeowner’s part, it is typically something the lender will require the homeowner to have. In fact, Arizona’s state banking laws require lenders to collect a year of insurance upfront.
Essentially the lender/bank wants to make sure the home they are loaning you money for is insured against a variety of potentially damaging situations. These situations might range from floods to vandalism. Simply put, if your home gets flooded they want to know insurance is in place to protect your home and their financial investment.
Since the homeowner’s/hazard insurance is usually required by the bank, they will want to have record the home is insured before funding your loan. Hence why they want the premium paid upfront.
When it comes to homeowner’s/hazard insurance i would recommend talking with your insurance agent to determine the best policy. The most common homeowner’s/hazard insurance policy is referred to as a “basic form”. There is also a “broad form” available that covers a larger list of items.
Here’s a list of the most common items you will find in each form Read the rest of this entry »
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