Insurance helps people Obtain Credit and Home Loans
Being able to obtain credit is essential if our economy is to flourish. Without credit, most people couldn’t buy homes or cars or make other major purchases, and without demand for those products, our economic engine would stall. Without credit, most businesses couldn’t start—much less expand—their operations, and many jobs simply wouldn’t be created.
How does insurance fit into the mortgage and credit system? An example will help explain. Let’s say you want to buy a house. The home costs $150,000. You only have $5,000, so you borrow $145,000 from a bank. The $145,000 loan gives the bank a financial interest in your house (called a mortgage). That is, in order to help ensure that you can pay back the $145,000, the bank wants to make sure that nothing happens to your house. What if your house burned down? The bank would lose $145,000!
When it lends you the money, then, the bank will require you to insure your house. The policy will be written so that if the house is destroyed, the bank will be paid the amount of its financial interest in the house, which will decrease as you make payments on your loan. You will receive the balance of the benefits. The insurance policy protects both you and the bank against loss. The same principle works to help people get car loans and to help businesses get money to expand. Insurance works hand in hand with credit to maintain our nation’s prosperity and standard of living.
When obtaining your new home mortgage loan, be sure to speak with a qualified independent insurance agent in MN who can shop various homeowners insurance companies to get you the best deal on the best coverage for your home and auto insurance needs.