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Shopping for Insurance

Mortgage Library: Closing of Your Mortgage: Shopping for Insurance

There are several types of insurance that need to be purchased in conjunction with home loan.

Homeowners insurance. All mortgage lenders require that the borrower have some type of homeowners insurance to protect their investment against loss to the property. Homeowners insurance (also called hazard, or fire insurance) ensures that the property will be replaced or the damage will be repaired up to the amount of coverage obtained. In most states, coverage must be equal to the loan balance or the value of the home, whichever is greater. Your homeowner's policy must meet the lender requirements.

Flood insurance. Homeowners insurance does not cover flood-related damage. If you think your home is at risk, you might want to consider purchasing flood insurance.

The National Flood Insurance Program (NFIP), established by Congress, enables property owners to purchase insurance protection against losses from flooding. It is administered by the Federal Emergency Management Agency (FEMA).

If your home is in a special flood hazard area flood insurance is required as a condition of granting a mortgage loan. You may consult special flood insurance maps, published by the FEMA, to determine if the property is in a special flood hazard area (SFHA). These maps are usually kept on file at local town hall or county building and are available for your review. Or these maps may be ordered by phone or fax from FEMA.

Flood insurance premiums depends on the amount of coverage purchased, location, age of the building, building occupancy, the design of the building, and, for buildings in SFHAs, the elevation.

Title insurance. A title insurance protects against any tax liens, unpaid mortgages, or judgments missed in the research of the history of title on the property. It is required to obtain a lender's title insurance policy only. If there is a future claim against the property's title, lender title insurance will reimburse the lender for any losses incurred.

If you also desire the protection of title insurance you should purchase a buyer's title policy, but it is not usually required by the lender. This is a one time premium, and usually the cheapest rate might be offered by the company that did the title search. It is also advisable to inquire about the seller's title insurance policies on the property, for it may be possible for you to obtain a policy at a lower reissue rate.

Life and health insurance. Many mortgage lenders offer life and health insurance policies for their borrowers.These types of insurance policies are not required to obtain financing.

Start shopping for insurance as soon as you have an accepted offer. Many buyers wait until the last minute to get insurance and do not have time to shop around.

Insurance is a very competitive business and the price you pay for your homeowners insurance can vary by hundreds of dollars, depending on the insurance company you buy your policy from.

Make a few phone calls, or visit several insurance companies online. This will give you an idea of price ranges and can save you a good sum of money.

Twelve Ways to Lower Your Homeowners Insurance Costs (Insurance Information Institute) Here are some things to consider when buying homeowners insurance.Insurance is a very competitive business and the price you pay for your homeowners insurance can vary by hundreds of dollars, depending on the insurance company you buy your policy from.

State Insurance Regulators Each state has its own laws and regulations for all types of insurance, including car, homeowner and health insurance. Many of these offices can provide you with information to help you make informed insurance buying decisions.

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