This type of insurance is commonly referred to as the “homeowner’s policy”. It protects you, the insured, against loss which could be sustained in the future as a result of fire, theft or other mishap. Because a serious loss could reduce the value of the property below the amount owed to the lender, the lender has a right to be added to your homeowner’s policy as a party who may be entitled to a portion of the proceeds in the event of a loss (“loss payee”). If you are financing your property with a lender, it will ask that you provide evidence that its name has been added to your homeowner’s policy for this purpose. Assuming your premiums for the current year are paid, you will not incur any additional cost since your annual premium pays for full coverage. Your lender will require you to obtain a binder from your insurance agent before the closing. You must also obtain a one year paid receipt with the binder.