Insurance Tips for Homeowners and Buyers

Do You Need Mortgage Protection? 

If you have a mortgage on your home, you have probably received several offers from insurance companies that sell coverage to pay off your mortgage if you die unexpectedly. Although insurance in general is a good idea, mortgage insurance is usually a poor value in most cases. 
If you read the large print, it appears that the policy will protect your family if you die before your mortgage is paid off. All you have to do is fill out the paperwork, have a physical exam, and pay a little more each month. The fine print, however, may limit the coverage relating to accidental death. If there are two people on the deed of trust, the policy may pay only half if one of them dies. 
When considering mortgage insurance, call a good insurance agent before you send in your forms. Insurance experts usually advise against separate policies to cover various contingencies. A regular term life insurance policy equal to the amount of your mortgage will probably offer you a lot more coverage for your money. 

Do You Really Need Title Insurance? 

When a home is purchased, title insurance is one of the closing cost items on the closing statement. This insurance protects the buyer from defects in the title that are not discovered until after the closing. There are two kinds of title insurance–coverage that protects the lender for the balance of the mortgage if the buyers have a loan, and coverage that protects the buyers’ equity in the property. 
It is prudent to purchase owners’ coverage because most of the title problems that arise after a closing are not from a sloppy title search, but are the result of inaccurate information in the public records. The ownership chain goes back a long way, and fraud or misrepresentation anywhere in the chain could mean big problems. Title insurance will protect you if a wife or husband did not properly sign off on the ownership papers or if the property was sold as part of an estate that was later disputed. Most people do not have to deal with the title insurance company after the closing, but this coverage could save your investment if a problem arises. 

Hazard Insurance 

Are you considering taking out hazard insurance on a property before you actually take title? It may be a good idea! 
Even though you are not yet the owner of record, as the buyer, you have an insurable interest in a property the moment that you and the seller execute the sales agreement. As a matter of practice, however, buyers do not usually take out insurance until the papers change hands, and it should not be necessary if the agreement of sale is properly executed. 
It is very important to both parties that the agreement states that the property will be insured for a specific amount. From the buyer’s point of view, an adequate sum must be stipulated, and the agreement should not read “as now insured”, which can indicate that the seller may not want to increase the insurance. 
As a general rule, the amount of insurance on the buildings on a property should equal the sales price, less the value of the lot. 

Home Warranties 

You have just found a new home that you love and are planning to place your current home on the market. When the day arrives for your first open house, you begin to think of all of the things that could break down or go wrong. The air conditioner may stop working or your trusty old dishwasher might “bite the dust” the morning that the structural inspection is scheduled. Purchasing home warranty protection is one way to reduce these worries for you and your buyer. 
The most popular warranty plans cover the home from the time it is listed until one year after the closing date. Although the details of these policies vary, there is usually a standard deductible of $35 to $100 (this amount differs from state to state). Many sellers purchase these warranties to make their property more attractive to potential buyers and to limit their liability in the event that a problem is discovered after the closing. 

Insuring Your Home 

Many home buyers are concerned about whether they have an insurable interest in the property before the actual closing. The answer is an unqualified “yes”. Although the buyer is not yet the recorded owner of the property, he or she has an insurable interest in the property as soon as the agreement of sale is executed by both the buyer and seller. 
Should you get hazard insurance before the closing? It depends. Buyers do not usually insure a property until the title passes to them from the seller. However, it’s wise to know what the agreement between you and the seller stipulates with regard to insurance. 
Most agreements state that the property will be insured for a specific amount. This is very important to both parties. From the buyer’s point of view, it is also critical that an adequate sum or full replacement value be stipulated. Watch out for agreements which read “as now insured”. This is an all-too-common practice which usually indicates that the seller does not to want to increase inadequate insurance coverage. 

Owner’s Title Insurance 

If you finance your home, the lender will require you to purchase title insurance for the amount of your mortgage. You will be given the option of increasing the coverage to include your equity in the property. The owner’s coverage fee is a one-time charge that protects your equity in your new home, including its appreciated value. Most experts agree that the additional coverage is a good idea. 
Before your sale is finalized, the title company will inspect the public records and confirm the sellers’ ownership of the property. They will look for any liens that may have been filed against the property, and that must be paid off before it can be sold. Even the most careful search, however, cannot guarantee that there was not an error at some point in the transfer of title during the chain of ownership. Title insurance is one of those things you will probably never need, but if you do, you will be very glad you have it! 

The Purpose of Title Insurance 

When you finance a home through a lender, you will be required to purchase title insurance to cover the amount of your mortgage loan. At the closing you will be given the option to buy additional coverage to protect your investment. 
Before the closing, the title company will order a title report to make sure the sellers actually own the home and that no one else has a legal interest in the property. This process will identify any potential title problems or liens. Title insurance covers you against any future claims that did not appear on the title report. It is a one-time charge that you pay at the closing of the transaction, and it covers your future equity up to a stated maximum amount as your property increases in value. It’s a small price to pay to protect such a major investment. 

Your Life Preserver 

Title insurance is like a life preserver on a boat. You will probably never need it, but if you do, you will be very glad that it is there! How does title insurance work, and how does it protect you in the home buying process? 
A title search will be ordered before you buy a home, to make sure that the sellers legally own the property, and that no one else has a legal interest in the home. The title company will also check through the ownership records for any liens, easements or other encumbrances on the title. This search should turn up any transactions that may not appear on the public record, such as an unsound transfer that occurred many years ago. Title insurance protects you against future claims against your home. 
Your real estate agent can give you more specific information about the cost of title insurance and the types of coverage available in your area. 

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