When you buy a property, it’s always recommended that you also buy contingency insurance to protect your mortgage.
But what exactly is this type of insurance policy and what is it for?
In a nutshell, a contingency insurance is a policy that can insure the user against any other insurance coverage that is taken by a third party individual. This means that in the event that your primary insurance cannot cover your loss due to the third party (such as a landlord or seller) taking it, then this one will be your safety net.
This is a very important policy for those who are holding a mortgage because it can protect you in the event that there would be complications that arise in the payment of the mortgage.
Let’s say that you have already bought a home (with included primary insurance already) and still need to pay the remaining mortgage payables. Somewhere along the line, you suddenly have a tough time paying the mortgage and eventually can’t pay. With this, the seller expresses wanting to take back the property. Because the primary insurance has already been taken by the seller, then that means that you won’t have much financial protection in your side. The contingency insurance is used to protect your financial state in this case since the primary insurance was already taken.
Contingency insurance is also good if you have taken a loan and used your title as a collateral. When this happens, the creditor may choose to foreclose your property in order to pay for the amount that you owe the creditor. In the event that the primary insurance was already taken, the contingency insurance is still able to protect you in this situation. It would serve as your safety net so that you won’t be left in the dark after the creditor plans to take your property.
The contingency insurance covers pretty much what your primary insurance coverage includes. However, the coverage plan will all depend on the insurance company that you are using. The contingency insurance is always an important part of buying property because it enables you to protect yourself in any situation so that the damage on you won’t be too bad. So when you buy property, or even rent property for that matter, it’s extremely important to have a contingency insurance plan to be fully protected from any event like the above mentioned.