If you’re planning to buy a condo and need to take out a mortgage, your lender will likely require you to have a condo insurance plan. Even if you’re not taking out a mortgage, condo insurance coverage is still a wise idea. If you need help selecting the right insurance plan and are looking for agents who serve Round Rock, TX, and nearby communities, consider working with DGIA LLC. Let’s explore why lenders require insurance.
Lenders Aim to Mitigate Risks
Simply put, the right insurance plans mitigate many risks. This is true not just for the property owner but also for lenders. Mortgages are collateralized, meaning the loan is backed up by collateral, typically the property purchased.
If the borrower defaults on their loan, the lender can take possession of the home to sell and recoup money. This means the value of the property is significant to the lender. The more valuable the property, the more the lender will be able to recover should they have to sell the condo or home.
If a storm or other disaster damages a condo property, the value of individual condos will decrease, especially if the property isn’t repaired and restored. While the condo’s management organization may have insurance covering some of the damage, that insurance probably won’t cover everything.
The right condo insurance will provide additional coverage and may cover storm damage to specific condo units, protecting both the property owner and the lender. Of course, reading the fine print of any coverage plan is crucial to understanding what’s covered. If you need help selecting condo insurance and want to work with agents servicing Round Rock, TX, DGIA LLC can help.
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