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| *Loan,banking and credit>>>homeowner insurance |
Why do you have to pay 1 yr of homeowners insurance ahead of time when purchasing a home? |
Why do you have to pay 1 yr of homeowners insurance ahead of time when purchasing a home? All insurance is paid in advance. That way the insurance company doesn't get hit with a demand for repayment before it received payment for the insurance. Insurance is a gamble. The insurer bets that the insured will not need to collect. The Insured is betting they will. Since when you take a mortgage you do not own the home. The bank does. The government made it a law that you have to take out insurance so that when the house burns down in the middle of the night 1) you are covered for part of the loss (need renters insurance for your belongings) and 2) the bank is able to recoup the loss because you no longer want to pay for a house that is charcoal. Source(s): LOMA sites (Life office management association) Because YOU do not actually own the home, the bank does, and they want their investment to be protected. Because if something happen to your house you would not be covered, it's kinda like paying a deposit on an apartment or rental house. All banks, mortgage companies want to make sure there covered on the loan they made you if something happened to house. R eal Estate You are paying a prorated amount for the year and then paying ahead for the following months for each month. |
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