What is the requirement of the borrower in the Covenant to Pay Insurance?

The requirement of the borrower in the Covenant to Pay Insurance is to have property insurance. This covenant is designed to protect the lender's interest in the property by ensuring that there is financial coverage in place to mitigate risks such as damage or loss from fire, theft, or natural disasters. By having property insurance, the borrower agrees to safeguard the collateral backing the loan, which is essential for maintaining the lender's security.

This requirement is a standard provision in mortgage agreements. It ensures that in the event of damage to the property, the insurance will cover the costs of repairs or compensation, thus protecting both the borrower’s investment and the lender’s financial stake. Unlike a reserve fund, which involves setting aside money for future expenses, or annual updates to insurance policies, having the insurance itself is a primary protective measure. Paying for inspections is also important for property maintenance but is not directly related to the insurance obligation outlined in this covenant.