2016-05-31 10:46 AM

Your Mortgage & Home Insurance

Buying a home is an exciting venture!

As with any contract, your mortgage company will insist you comply with certain requirements, one of these requirements is that you must maintain adequate homeowners insurance coverage. Typically, adequate coverage means that you are insured for the value of your home to 100% of replacement cost or that you maintain enough coverage to address the amount of the loan. While the latter may mean that the mortgage company wants enough coverage to pay the outstanding loan balance, most homeowners policies do not cover the loan amount, just the rebuilding of a home. In short, the mortgage company wants to make sure that they are protected if your
home suffers an insurable loss such as fire or water damage.

There are several times that your mortgage company will insist you provide proof of home insurance.

This usually happens when:

  1. When you first purchase your home; this will be done through your lawyer.
  2. At the renewal; though most insurers automatically send the mortgage company a copy of the renewal.
  3. When you refinance and there is a new lender, this is done with your lawyer.
  4. When a policy is cancelled, either at the renewal or for non-payment.

When you get a request from your mortgage company for proof of insurance, your best course of action is to forward it along with any instructions to your
insurance broker.

If you are purchasing a new home, you should always contact your broker at least 2-3 weeks prior to the closing date to make arrangements for
a policy. Getting the request to your broker as soon as possible will allow for fewer problems and a speedy turn around for complying with your
mortgage company’s homeowners insurance requirements.

If ever there is a gap in your homeowners insurance, the mortgage company can place coverage on your home at your expense. This coverage is usually very expensive and most likely will protect the mortgagee's interests, not yours. The main thing is, the coverages are likely very basic, will probably not protect you to the extent a regular homeowners policy would, and probably doesn’t include liability insurance. The reason these policy premiums are very expensive is because the policy is not underwritten, and because of this there may be an assumption that you are unable to get coverage on your own and therefore your property could be high risk.

To avoid the expensive coverage described above or any other issues, please always maintain good communication with your Insurance Broker.

Comments

Got something to say? Join the discussion »

Leave a Reply

 [Quick Submit with Ctrl+Enter]

Remember my details
Notify me of followup comments via e-mail