Your Mortgage Blog

Posted on
March 1, 2025
by
Neena Vlamis

Buying a home is a huge milestone and protecting that investment with the right homeowner's insurance is essential. Not only does homeowners insurance provide financial protection against damage or loss, but it’s also a requirement when securing a mortgage. As you shop for the right policy, ensuring your insurance agent stays in close communication with your lender is crucial. Here’s why.

1. Ensuring Proper Coverage

Lenders require homeowners insurance to protect the property, which serves as collateral for your mortgage. Your lender will have specific coverage requirements, including:

  • Dwelling coverage equal to or greater than the loan amount
  • Protection against common risks like fire, storms, and vandalism
  • Additional coverage for flood or earthquake insurance if the home is in a high-risk area Your agent should work with your lender to make sure the policy meets all requirements, preventing any last-minute surprises at closing.

2. Smooth Loan Approval & Closing Process

During the mortgage approval process, your lender needs proof of insurance before finalizing your loan. If your agent isn’t proactive in providing the necessary documents, such as the declarations page and binder, it can cause delays. A direct line of communication between your agent and lender ensures everything is in place, keeping your closing on schedule.

3. Accurate Escrow Payments

If your mortgage includes an escrow account for insurance and property taxes, your lender will handle your insurance payments on your behalf. Your agent must send premium details to your lender to ensure the correct amount is collected and disbursed. Any miscommunication could result in incorrect payments, leading to lapses in coverage or overpayment issues.

4. Seamless Policy Updates & Renewals

Over time, you may need to adjust your coverage due to policy changes, refinancing, or home improvements. Keeping your lender in the loop ensures that updated policies are reflected in your escrow payments and that your home remains properly insured. Additionally, your lender will need to be notified of any provider changes to update their records.

5. Avoiding Policy Lapses

If your lender doesn’t receive proof of active insurance, they may purchase a lender-placed insurance policy on your behalf—often at a much higher cost. Maintaining open communication ensures your policy remains active, avoiding unnecessary expenses and coverage gaps.

Choosing the right homeowners insurance is just as important as securing the right mortgage. By ensuring your agent and lender stay connected, you can streamline the loan process, prevent coverage issues, and avoid unexpected costs.

If you have questions about homeowners insurance requirements or how to coordinate with your lender, our team at A and N Mortgage is here to help!

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