Why the need for insurance when buying home? Is it compulsory for me to get approval?
Bond Insurance in its own is not a compulsory requirement to have before buyers can get an approval from the banks. However with home buying and the its financing aspect involved often makes it both an interesting and yet complex process, which presents a lot more critical factors to be considered by both the home buyers and lending institution which is considering granting the home loan. These considerations unfortunately don’t only end with the buying of a building. There are also hmany inherent lifes risks involved that can negatively impact both side, as we know life has its ups and downs and can be very unpredictable.
These inherent risks can presnt in many forms, including but not limited to the following;
- The death of the family breadwinnner who may also be the sole person responsible for the upkeep of monthly bond repayments. This can bring such unimaginable devestation to a family on all ends, which may include the loss of their home as a result of defalting on the bond payments.
- There may also be economic reasons that may negatively impact on the family’s abilitty to earn income, such as loss of income due to an enomic downturns that see a breadwiners placed through a forced lay-off and/or retrenchments.
- Unforseen circumstances may include temporary or permanent disability leading to loss of income.
- The list may stretch quite wider even including natural disasters thay may result in damanade to the actual property building structure and home contents. So as result of these factors, banks often make it a requirement for home buyers to have bond insurance to cover the any outstanding bond paymants in the event of an unfirseen cases such as listed herein above. Building is moore so for the structural integrity of the building in case of damage.
- The rational in this regard as already indicated is that banks/lending institution may requires making provision for bond insurance to cover the remaining balance in such instances of the loss of life or disabilty and building insurance for damage to the property.
- This is done as protection for the financed property as it constitues an asset for both parties.
- Insurance in its own also comes in many variations and this article herewith helps to provide an explanation as well as description some of the more common variations of insurance options available to the home owners as may be required by the lender to be in place before granting or approval of the new home loan.
There are inherent risks to consider!
Commons INsurance Types
Bond Protector: This type of insurance is generally taken on the life of the home buyer or breadwinner, as intended to provide for dependents in the event of the death/passing of the person responsible for the monthly bond payments, this ensures that any remaining balance of on the bond account is settled with the bank/lending institution. This helps to ensure continuance of the lifestyle the family was accustomed to even after the passing of the breadwinner.
Buiding Protecor: Often called home owners insurance or simply referred to as building insurance often covers any destruction or damage that may occur to the interior and exterior of the newly acquired home, loss or theft of possessions, and includes personal liability for harm or injuries to others (third-parties).
Home owners insurance covers against cases of an unfortunate misfortune or occurrences, such as loss due to theft of possessions (home contents) or damage to the physical structure of buildings. Other insurable perils included are fire, plumbing and natural disasters like flooding, lightening strikes, land slides, earthquakes.
Home Contents Insurance: cover protects the house contents against perils such as Theft, Intentional Damage, as well as damage caused that may result from other elements like Power Surge or a Burst Geyser. It also includes damage caused by Fire, Lightning Storm, Hail and Floods.