Why does a home mortgage lender require the owner of a home to carry homeowners insurance?
A. So the lender knows that the owner will make needed repairs on the home
B. So the lender will be compensated if the home is destroyed by fire or disaster
C. So the lender knows that the owner will be able to afford the entire loan
D. So the lender will still be paid if the homeowner is injured or disabled

The correct option is B. Home mortgage lenders require the owner of a home to carry homeowners insurance because if the home is destroyed by fire or disaster then the lender will be compensated.

What is homeowners insurance?

Homeowners insurance offers coverage for house repairs or rebuilding in the event of a fire, smoke, theft, vandalism, falling tree, or weather-related damage from wind, hail, or lightning. Furniture, clothing, and other belongings are typically covered by most common homeowner insurance policies.

If an unforeseen event, such as a fire or burglary, occurs, your homeowner's insurance will cover the losses and damage to your property. Your mortgage lender wants to ensure that your property is insured when you have a mortgage. Because of this, lenders typically demand evidence that you have homeowner's insurance.

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