Why do we need to have insurance on the land portion of our construction loan?

We are getting a construction loan through Wells Fargo. We have bought land already and have a loan on it with another bank that we are going to roll over into the construction loan. Our loan officer told us that we have to get insurance on the whole loan amount but that doesn't make since. Why do we need to have home owners insurance on land?

home own insurance is ONLY for house , never for land.

how ever once u rollover land in to house mortgage not construction loan , the insurance will still be on the appraisal of the complete package.

they maybe talking Private Mortgage InsurancePMI which covers bank if u do not have real money down (not appraisal money)

What would happen if a couple of kids were playing on your lot and got hurt or someone tripped and fell on your lot? They would sue you. Thats why you need insurance on the land.

When I was building the contractor had to carry the insurance until we occupied the home.

As far as appraisal money on a new construction. They will take the appraisal into consideration when they determine the loan to value ratio, this will determine PMI. Since their is no selling price, they have nothing else to go by. At least that is how BofA, USSA, and all the local banks in my area do it.

For my construction loan they rolled land loan into the construction loan. They wouldn't do it any other way, unless the land had no lien on it. The issue is if you default on the loans what would get paid first the construction loan or the land loan.