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Insurance Information

As you progress through the home buying process, the question of insurance will be raised. Here are the basic types of insurance you should know something about. Be aware that most policies contain standard exclusions and exceptions.

Required Insurance

Homeowner's Insurance
Homeowner's insurance covers fire, theft, certain natural disasters and personal liability if someone is injured on your property. It protects the lender against the loss of the property securing your mortgage. You'll have to prove that you have adequate homeowner's coverage as a condition of obtaining a mortgage.

Title Insurance
Several things happen behind the scenes when you buy a house. For example, the settlement/closing attorney will perform a title search to make sure the seller has the legal right to transfer ownership, and to see if there are liens or restrictions on the property. Lenders Title Insurance is required and protects the mortgage company from potential losses.  Owners Title Insurance is optional (but strongly suggested) and protects the home owner from potential losses.

Title insurance provides protection against financial loss in case a "defect" in the title turns up at some future date. Possible defects include:
  • Flawed information in deeds or mortgages (like an incorrect name).
  • Liens or claims against the property or the property owner such as unpaid taxes or bills for water service.
  • Claims to ownership from a former owner or spouse.
  • Invalid deeds (from a past sale or transfer by a party who didn't actually own the property).

Insurance That May be Required

Private Mortgage Insurance
When you acquire a mortgage (purchase or refinance) with less than a 20% down payment, you will have to pay private mortgage insurance.  This coverage helps protect the lender in case you can't make your payments and default on the loan.  Mortgage insurance makes it possible for people with small down payments to buy the home of their choice.

Flood Insurance
Flooding is not covered by a standard homeowner's insurance policy.  We will determine if you need flood insurance and advise you if that is the case.  The majority of homes in our area do not need flood insurance. 

If there is a potential for flooding, you will be required to purchase a policy that covers the structure and your personal belongings.  Flood insurance can be purchased from an insurance agent or company under contract with the Federal Insurance Administration (FIA), part of the Federal Emergency Management Agency (FEMA).  Flood insurance is only available where the local government has adopted adequate flood plain management regulations under the National Flood Insurance Program (NFIP).

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