Remember, it's for a worthy cause -- protecting what's likely your most valuable asset.

Flood insurance

Your lender could also require flood insurance, available from the same agent or company that sells you your home policy.

Federal law makes the coverage mandatory if your home is in a federally designated high flood risk zone within a flood plain and you are signing for a federally insured mortgage or want to remain eligible for certain types of federal disaster assistance after the president declares a major disaster.

When you buy flood insurance, the basic policy covers your home's foundation, flooring and walls. You must purchase separate coverage for the contents, if you want it. The structure and contents of garages, sheds and similar structures can be insured, but only up to 10 percent of the policy limit.

You can purchase the insurance even if you aren't in a high flood risk zone, provided your community participates in the National Flood Insurance Program.

Quake insurance

Quake insurance isn't mandatory, but consider the coverage if you buy a home near a fault line. Also consider it in earthquake areas if your home sits on a slope, hill or atop soils prone to liquefaction during a quake. You may need a geologist or soils specialist to determine your risk. In California, all insurers that comprise the California Earthquake Authority offer the same group of policies at the same rate for each, but non-CEA insurers offer a variety of coverages for a variety of prices. Shop around.

Title insurance

Lenders also require you to buy title insurance when you open escrow to assure that the property you are about to buy has a title that is free and clear of encumbrances, liens, judgments, claims of ownership and other events that happened in the past. The one-time (unless you refinance) cost is spent researching the title to make sure the home truly belongs to the seller. In some areas, sellers pay for title insurance. In others, buyers foot the bill. Also, depending upon the community, coverage varies. In some cases, the buyer and the lender are protected by one policy. In other areas, two or more policies could be necessary. Title insurance fees also vary. Comparison shop for this coverage too.

Private mortgage insurance

Lenders directly levy what's called "private mortgage insurance" (PMI) if your down payment is less than 20 percent of the home's value. The coverage doesn't protect you, it protects the lender from you defaulting on the mortgage. That appears questionable, but if you can't come up with 20 percent down, it gets you in the door. Studies show that those who put less down and have a smaller stake in their home are more likely to default than buyers who plop down larger down payments.

However, private mortgage insurance abuses led to a new federal law effective July 29, 1999 which says, for loans written on or after that date, lenders must automatically cancel PMI when your mortgage balance shrinks to 78 percent of the home's original purchase price.

You may apply to have the insurance removed when the balance reaches 80 percent of the purchase price, provided there is no second mortgage on the property.

There is no federal provision for removing PMI due to value appreciation, but under no circumstances can the lender retain PMI once your loan reaches its half-way amortization point. That's 15 years on a 30-year mortgage.

Some Freddie Mac, Fannie Mae, Federal Housing Administration (FHA), Veterans Administration (VA), other loans deemed high risk and loans with lender-paid (in the form of a higher interest rate) PMI have different PMI rules and governing legislation.

Some states also have laws that were not superseded by the federal law.

Because PMI coverage is assigned by your lender, there is no real way to shop around for it except shopping for other mortgages to compare their PMI premiums.

Be sure you know your rights in your state, and scrutinize PMI deals that finance your premiums along with your mortgage. The loan rate generally costs more to cover the insurance and when the cost is financed or otherwise "lender-paid" it's often exempt from the federal law.

Editor's Note: This is part two of a two-part series. To go to the first half of this special installment, click here.