For Sale by Owner News and Articles
Insurance That Protects Your Home and Your Belongings
By Marcie Geffner
It's often said that a home is the biggest purchase most people will make in their entire lives. That's why it's so important to make sure your financial investment in your home is adequately protected through the right types and amounts of insurance coverage. Here are some of the insurance products that your mortgage lender may require you to purchase or that you may want to purchase for your own peace of mind.
A standard homeowner's insurance policy protects you (and in some circumstances your lender) from financial losses in the event of burglary, fire and certain other types of damage to your home or belongings. These policies also include liability coverage, which kicks in if someone is injured on your property.
Many homeowners don't realize that damage from floods isn't a covered loss under the typical homeowner's insurance policy. Separate flood hazard insurance can be purchased through most property and casualty insurance companies and agents under a national program organized by the Federal Emergency Management Agency (FEMA). If your home is located in a flood-prone zone as defined by FEMA's maps, your lender will probably require you to obtain a flood insurance policy.
Mortgage insurance protects your lender from financial losses if you default on your mortgage. If your downpayment is less than 20 percent of the purchase price of your home, the lender typically will require that you obtain - and pay for--mortgage insurance in the lender's favor. Mortgage insurance isn't required for a mortgage with a higher downpayment because the lender expects to be able to foreclose and sell the home for more than the loan balance if the borrower defaults on the mortgage. Mortgage insurance is issued by private companies and government agencies, most notably the Federal Housing Administration (FHA).
Mortgage life, disability or unemployment insurance
Often confused with mortgage insurance, mortgage life insurance pays the outstanding balance owed on your mortgage if you die. Mortgage disability and unemployment policies pay a set number of mortgage payments (usually six or 12) if you become disabled or involuntarily lose your job, respectively. Mortgage life insurance is rarely a good value because it's really no more than term life insurance with a face amount that diminishes over time as you pay off your mortgage.
Title insurance protects you and/or your lender from unanticipated claims of an ownership interest in your property. New title insurance policies typically are sold as a package that wraps a lender's policy with a homeowner's policy.
Personal property insurance
Personal property insurance guards against the theft of household goods separately from real property. Coverage is available for renters and individual condominium owners, as well as for people who are moving or storing household goods in a self-storage facility. Commercial moving companies provide basic no-additional-charge coverage that pays 60 cents per pound if goods being moved are damaged. Additional coverage can be purchased separately.
Copyright Marcie Geffner. All rights reserved. No part of this article may be used or reproduced in any manner whatsoever without written permission of the author.