When you’re getting ready to close on your new home, all the insurance can be very intimidating. You have homeowners insurance, title insurance, private mortgage insurance, and a ton of other policies that by and large you understand the need for. However, when it comes to figuring out what insurance policy is for whom, you might need a rough guide to understand it.
Let’s cover these three types of insurance – except theres actually four types.
- Homeowners insurance: This is the policy that covers your home itself. Homeowners insurance covers the structure of your home, any outbuildings or other structures, coverage for your belongings, and liability protection but only against specifically named perils and hazards. You may also elect to add additional coverage for loss of use, additional living expenses, replacement cost, law and ordinance coverage in the event of building code changes, and other protections. In Florida, homeowners insurance does not cover flood insurance premiums, nor windstorm, nor sinkholes. You will need to purchase additional coverage for these hazards and perils.
- Lender’s title insurance: This type of insurance is not for you, though you will be paying it. This protects your mortgage lender against title defects with the property and ensures that they will not lose money on the deal, due issues that may arise prior to your purchase.
- Owner’s title insurance: This type of insurance is acquired at closing, and protects a buyer from losses stemming from an uncured title defect stemming from fraud, error, or omission, prior to your ownership. You will also be protected for prior taxes which may be due, possible outstanding interest of heirs of prior owners, as well as insuring that your deed is recorded properly. When purchasing the required Lenders Title Policy, you will receive a simultaneous rate, substantially reducing your costs.
- Private mortgage insurance: this vaguely worded type of insurance is not for you, it is for your mortgage lender. Specifically, it protect your lender in case you default on your mortgage and is generally a feature on mortgages where the buyer cannot produce a 20 percent down payment for the home. There are several different ways that this is paid, according to the Consumer Financial Protection Bureau, though not all low down payment loans require it and you may end up with a higher interest rate. After you have paid enough of your mortgage to have a certain amount of equity in your home, you have the right to request that PMI be canceled.
- Mortgage protection insurance: Mortgage protection insurance is protection for the homeowner in case of unemployment, disability, or death. However, Bank Rate notes that this is a type of insurance that has a declining benefit the longer that you own your home. Ideally you should talk with a financial advisor before acquiring this type of insurance, as other types of insurance may give you and your heirs a better payout.
There are a lot of things that nobody really considers when they’re buying their first home. However, unless you have appropriate and comprehensive coverage, could be in for a bigger bill later than you would be saving in insurance premiums now. Take the time to consult with our title insurance professionals about what kind of coverage you need to fully protect your family and your considerable investment in a new home.
Founded in 2009 during one of the slowest real estate markets in the past half century, First International Title has grown from a handful of offices to over 30 offices throughout the state, from Key West to Pensacola, including its company headquarters in Coral Springs. We provide closing services in English, Spanish, German and French. With a combined 1,000 years of experience, our staff has extensive experience closing residential, refinance, reverse mortgage, short sale, REO, deed-in-lieu and commercial transactions. We do not outsource or offshore any portion of our core title services. We employ our own searchers and examiners to ensure quick turn times and accuracy. At First International Title, we put our customers first.
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