Who pays for your home Insurance?. Make sure you get a good deal!
To protect their investment, home
lenders require the borrower to have home insurance protection. Some people fail
to get their own insurance and the lender places an insurance protection policy
in the customerís property at the insurerís expense but there are some
things that we should consider before we just keep on paying for our
First of all, the price of the
insurance that is protecting your property may be the highest in the market if
it was placed by your mortgage company. These insurance companies usually make
deals with the lenders to make it profitable for both, the insurance company and
the lender. Since the borrower pays one consolidated bill to the lender and it
is divided by 12 monthly payments, the borrower does not notice the difference
and if he does, he usually thinks that it is minimal therefore he just pays just
out of laziness.
Also, the insurance placed in the
property sometimes only covers the lender interests and it may leave you out.
What I mean is that if your property is worth $200,000 but you already paid
$100,000, the insurance placed in your property may only be for $100,000. What
it means to you is that in a case of fire and loss to the property the insurance
will pay your debt but you will no longer have a home or not enough money to fix
it or build a new one. In addition, third party protection is very important to
prevent a law suit in case of an accident within the limits of your property.
It is important to know the type
of insurance that has been placed in your property by the lender if they are in
charge of getting the policy for you. Every year most of the properties increase
in value therefore the insurance rate in your property may change. If the lender
placed an insurance protection policy that will only cover fire damages in your
property, then you do not have enough protection in case of an unexpected storm
First, what you need to do is ask
for a copy of you policy to the company that handles your mortgage if it was
them the ones that got the insurance for you. Make sure you have the minimum
required protection for your self and not only for the lender. Many people that
did not take that precaution ended up paying their home for years and losing it
in minutes. Their loan may ended up been paid but, where do they live now?
If you do not have enough
protection for your home, replace your policy with one that will provide you
with what you need. Call a few different insurance companies and get a rate.
Make sure you get a full explanation of the coverage that you are getting and
get it in writing. The cost may be the same or less than what you are getting
from the policy that your lender placed in your property and you will pay that
from your escrow money. In other words, the lender is going to keep paying for
your new policy and you will keep on sending one payment to your lender.
The main problem that some people have is that they do not get informed about the different options to insure their property. It is very important to remember that if your lender is the one that got the insurance for you, it is very likely that he only wants to protect himself and in some cases make a profit from the deal. If you are required to pay home insurance, at least get the best deal for less money.
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