When buying a house, is it necessary to purchase insurance?

Do I need insurance when buying a home? This is one of the questions homebuyers often ask. Partly because they feel that a house or condo is already highly valuable, and requiring additional insurance would be a significant expense. Therefore, many people are hesitant about the necessity of insurance when purchasing a home. Insurance that comes with a home purchase can be divided into two main types:

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Compulsory Insurance

Compulsory insurance is required by law. This includes fire insurance. When applying for a loan, the bank will usually offer you fire insurance immediately. Fire insurance provides protection in the event of an unexpected event. If a fire occurs, the insurance company will reimburse the bank, saving the homebuyer from losing money.

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Voluntary Insurance

Voluntary insurance is optional, and homebuyers can choose to purchase it. There are several types, including catastrophe insurance, which covers damage caused by natural disasters, and theft insurance, which covers damage to property and buildings. But the most common issue is mortgage insurance, which many banks often offer to home loan applicants in exchange for special privileges such as interest rate discounts. In reality, mortgage applicants are optional. The advantage of mortgage insurance is that if the applicant suddenly passes away, they will have insurance to help them continue paying off their mortgage, eliminating the burden on their loved ones.

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The primary purpose of any home loan insurance product is to protect both the lending bank and the loan applicant. In the event of an unforeseen event, the insurance company will cover the resulting losses. Having insurance coverage provides added peace of mind. However, each type of insurance has different conditions, coverage periods, sum insured, and premiums. To maximize effectiveness and ensure financial stability, it's important to thoroughly study the rights and conditions before deciding whether to purchase one.

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