Did you know that your lender will mandate that your homeowners insurance policy must not have a deductible greater than 1% of the value of the loan? This 1% maximum deductible is ridiculous when you consider the fact that the lender is covering the value of the loss, which is ultimately what the lender cares about, so it’s almost meaningless what the deductible is from the perspective of the lender.
The purpose of insurance, especially when you are borrowing money to pay for the product, is that it covers the owner in the event of damage or loss. When get a car loan from the bank, they will require that you get full coverage auto insurance on the car because it’s acting as collateral for the loan. If you can’t pay the loan, they seize the car and auction it to recover the value of the loan. The same holds true for a home, you are required to get homeowners insurance that will pay out the value of the home in the event of some sort of loss. That insurance will cover the bank in case you cannot pay off the loan.
So why the 1% maximum deductible rule then? It makes no sense!
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[...] you know in some states your deductible on your homeowners can’t be greater than 1% of the value of your home? I think it’s a ridiculous rule, those damn insurance lobbyists. [...]
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