Updated: Oct 6, 2022
When purchasing property, whether a home, a vehicle, property, or other asset, there is generally an exchange of currency for said property. In this transaction, the funding will either be paid for by your funds, or you will borrow money to finance your purchase. Often buyers will put down a percentage of the purchase price and finance the remainder. When financing, you will enter a contractual agreement between you and the financial institution. The terms of the agreement will vary from the number of months to the percentage of interest you agree to pay to the lender in exchange for funding. When purchasing a home, the lender is called the Mortgagee, typically a bank. When purchasing a car, the lender is referred to as a lienholder. What does this have to do with insurance? When financing your home or auto, you will be required by the lender to have insurance on each until they are paid off. You must also list the lender as either Mortgagee or lienholder on the insurance policy. Once the property has been paid off, these will be removed from your policy. The insurance company will send proof of insurance to the lender showing the lender listed on said property. This satisfies the lender by protecting their investment from potential loss.
Mike Goodman, Agent