How does property insurance help protect me as the lender?

We are in the home stretch of questions from the private lending FAQs series. Today, I am going to share with you how I answer the question that deals with insurance that we purchase that helps protect our private lenders and ourselves.

The question is: How does property insurance help protect me as the lender?

And here is my answer:

We buy property or hazard insurance to limit our risk and liability as a property owner and to protect the investment for the lender.

If there is a fire at the property that completely destroys the property (or another problem covered by the insurance policy) and the insurance company pays the claim, the proceeds and can be used to restore the property so it can secure the loan against the property.

Until my next post,

James

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