Home Insurance Requirements for Reverse Mortgages

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Reverse mortgages, available to seniors who have clear title on their home, allow them to use the equity in the home to provide either a lump sum of money or money distributed through multiple payments. Interest on these loans is added to the lien on the property which becomes due and payable on the owner’s death, the sale of the home, or if the owner moves to an old age home.


Like any mortgage, home insurance is required to protect the lender for the duration of the loan. The lender will require proof of insurance and a copy of the insurance declaration page, showing the name of the insurance company, the policy term, the insured, the amount and type of coverage, will usually suffice. 


The home must be insured to 100% of the replacement cost of the reconstruction value so that the home can be rebuilt and the lender will be protected in the event of a loss, such as fire. It's important that any improvements made to the building are reported to the insurance company to ensure the value is accurate, and if you live in an area that is subject to flood or earthquake, to arrange coverage for these perils.