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  • When is it Required to Have Homeowners Insurance in South Burlington?

When is it Required to Have Homeowners Insurance in South Burlington?

As risky as it sounds, there are some people who absolutely do not want to purchase homeowners insurance. Though this is something you do not see a lot of in South Burlington, some individuals decide to forego the protection a homeowners policy provides, which in some cases may not be doable because of a contract. These are a few of the instances when it is required to have insurance on your home in Vermont.

Homeowners Insurance South Burlington

When is Homeowners Insurance Required for South Burlington Residents?

Having a Mortgage on Your Home

It does not matter if you have a first or second mortgage on your home, if the bank holds the title, they will require that the property is covered by a homeowners insurance plan. Usually, they will require your premiums to go into the same escrow account your tax and PMI payments go into as part of your monthly house payment. Lenders want to make sure that if the worst were to happen, the insurance company would pick up the tab, since it would be too easy for a borrower to simply walk away from the contract in some places, or declare bankruptcy, leaving the bank on the hook.

While You Carry a Home Equity Line of Credit (HELOC)

If you do not have an escrow account, but you do have a HELOC, you will probably be required to carry an insurance policy on your house in South Burlington. You may not hear about this clause very often because the vast majority of homeowners already have an insurance policy, but your lender will probably make sure it is your responsibility to keep your policy current as long as the line of credit is open. Once you close your line of credit and pay it off, the contract between you and the lender is effectively terminated, meaning you can drop your homeowners insurance policy if you really want to, but rarely is it advisable.

Anytime Your Home is Used as Collateral

Again, a lender wants to make sure that they are covered if the unthinkable were to happen. Using a paid-off home as collateral for something like a business loan or personal loan will mean that you will have to carry a homeowners policy on the house. As with just about any situation where you are required to have a homeowners policy, it is a matter of contract law, not criminal law. You will probably never go to jail or have criminal charges brought against you in South Burlington for not insuring your house. You may end up with a lawsuit or possibly even a foreclosure on your hands if you decide to not insure your home as stated in a lending contract.

While it is not always required to carry homeowners insurance, many people have to do it as a condition to borrow money against their home. South Burlington does not usually see a lot of natural disasters or events that could completely destroy a home, but when it does happen, a homeowner without insurance could see every bit of their equity wiped out in a matter of seconds.

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This material is for informational purposes only. All statements herein are subject to the provision, exclusions and conditions of the applicable policy. For an actual description of all coverages, terms and conditions, refer to the insurance policy.

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