What is the required amount for fire/hazard insurance in relation to a mortgage?

The required amount for fire or hazard insurance in relation to a mortgage is typically enough to cover the loan amount. This ensures that, in the event of a loss due to fire or other hazards, the insurance proceeds would cover the outstanding balance of the mortgage. Lenders often require the borrower to maintain insurance at a level that protects their interests in the property, safeguarding against the financial risk associated with potential damages.

Choosing to insure for the loan amount aligns with standard lender requirements, as it provides assurance that the mortgage balance can be paid off, even if the property is damaged or destroyed. This requirement helps maintain the lender's security interest in the property throughout the life of the loan.

The other options are not suitable as they either do not meet the lender's requirements or do not adequately protect the investment made by the lender in the property. Ensuring the property for less than the loan amount could leave financial gaps and increase risk for the lender, while insuring for the full market value or the sale price may exceed what is necessary based on the loan balance.