If a borrower fails to maintain homeowner's insurance on a property, the lender may force place homeowner's insurance which can be very costly for a borrower.
Homeowners insurance protects you from financial losses caused by storms, fire, theft, and other events listed in your Homeowners policy. It is vital that you know what is covered and what is not covered by your policy. Be sure you read your policy carefully and understand your specific coverages. You should also be aware of your rights. Most states have a Consumer Bill of Rights for homeowners and renters insurance. Your insurance company must provide you with a copy of your state's Bill of Rights with your policy or renewal.
All properties that have a mortgage are required to have homeowners insurance.
Homeowners insurance can range in price from a few hundred dollars to a thousand dollars or more depending on the amount of coverage you desire for your home and the home value.
With regards to dwelling coverage, some lenders stipulates that a homeowner must carry the full loan amount, rather than the replacement value of the property, as the minimum coverage. However, many states have enacted regulations prohibiting such practice. Carrying dwelling coverage in excess of the replacement cost does not benefit the homeowner in any way. It only increases hazard insurance policy premiums. If a home suffers total loss as the result of an accident, insurers only pay out up to the replacement cost of the home, regardless how much more the home is insured for. Such policy is in place to curb insurance fraud.
Usually the policy will cover a certain percentage of the face amount for your personal property should something happen during a mishap that causes damage to your home. This would cover clothing, furniture, electronics etc...
Your Homeowner's Insurance policy may not cover damage to your property done by floods. If you are in a flood zone or below the flood table in your municipality, your mortgage lender may require that you acquire separate flood insurance.
There are two parts to a typical Home Owner Insurance policy, liability and dwelling. The liability part insures the home owner in case of lawsuits from third parties who suffer injuries arising from accidents occurred on the premises. As far as mortgage lenders are concerned, only the dwelling part matters. The dwelling part covers the home structure against damages. When purchasing homeowner insurance, be sure the policy covers damages to the home on a "replacement cost" basis rather than the "actual cash value". With "replacement cost" basis, loss is paid out based on the amount it'd take to rebuild the home. Under "actual cash value" coverage, loss is determined by deducting depreciation from the cost of the home. Therefore, under "actual cash value", the older the home is, the less it is insured for, regardless of the actual market value of the home.
Hazard Insurance - Insurance protects the named insured from specified losses. Mortgage Lender require to be named as "additional named insures or loss payee" to insure the mortgage is paid in case of total loss.
Lenders require that borrowers maintain hazard insurance equal or higher than their loan amount to protect the lender interest in the home case of disaster. Lenders also may have other requirements dealing with hazard insurance for example a maximum deductible.
If you allow your insurance to lapse the lender will put in force there own insurance policy. These policies are generally more exspensive then your standard 3rd party insurance policy.
Hazard Insurance is the same thing as Home Owner's Insurance
When choosing which insurance company to use, look into the company you use for other insurance, like auto insurance. You will sometimes find a discount for having both your home and auto with the same company.
You standard policy will also protect against peronal property located in the home in the event of a disaster or mishap. There are limitations as to how much they will cover so check your policy to see how much coverage you have.
Before an mortgage can be approved, an insurance BINDER must be acquired from an insurance company and submitted with the final loan application to the lender. The binder must state specific information about coverage based on the lenders requirements.
Insurance that covers property damage caused by natural (wind, storm, hurricanes, earthquake, tornado) or unnatural cause (fire, personal accident). Check with your Insurance Company to make sure Earthquake or and flood is covered for your home. This coverage is not always included. You can also check with your local government planner to find out what type of flood zone your property is in. Tip: Check with your local government planner yearly to see if your zone has been re-zoned to either a lower grade which might SAVE YOU MONEY. Ask a Mortgage Professional to help you if you think you can save money.