When you avail a mortgage loan, apart from the eligibility criteria that need to be fulfilled, sometimes there are other aspects to keep in mind as well. For instance, there are certain banks and lending institutions that make it mandatory to insure your property during the tenure of your mortgage loan. Now, you must be wondering why it is required. You see, when banks evaluate your property value they also take into consideration aspects such as the location, age as well as the resale value of the property in question.
Although it is not mandatory, it is advisable to insure your property against fire, flood, earthquakes and other hazards depending on the location your property is situated in. It is mainly to make sure that you don’t default on your loan should any of the above mentioned hazards affect the property you have mortgaged.
Naturally, in case a claim needs to be made, the beneficiary will be the bank or the financial institution where you have applied for a loan against your property. This is a safer option both to the applicant as well as the bank because, in case of any unforeseen circumstance that leads to the damage of your property, then you or your family need not be burdened with paying off the loan during such difficult times. Similarly, your lender also will be satisfied with the fact that the loan will be paid off despite the disaster that has occurred.
Remember that it is not a legal rule to insure your property during the tenure of the property; that is left to the discretion of the lender. However, with some banks it is compulsory and they facilitate the same. You can have the option of paying the insurance as a onetime payment (which amounts to less than 1% of your loan amount generally) or pay regular premiums as part of your emi. The finer details may be worked once your loan application is duly approved.