Title Tips

 

INSURANCE/WARRANTIES

 

In the course of a real estate closing there are various insurance or warranty products either required or available: 

 

Title Insurance:  Required unless otherwise stated, an owners policy in the amount of the sales price is required by the buyer and paid for by the seller.  A lenders policy is required by the mortgage company for the amount of the loan.

 

Hazard Insurance:  Required by the lender with coverage equal to or greater than the loan amount and with the mortgage company listed as a loss payee.  Hazard insurance or homeowners insurance is protection against loss resulting from fire, theft, wind, hail, etc., excluding floods and earthquakes.  Hazard insurance on a condominium is split between the homeowner and condo association with the association’s insurance covering the exterior and the homeowner the interior.

 

Earthquake Insurance: Not required but is added coverage to the homeowners policy covering loss resulting from earthquakes.

 

Flood Insurance: Required only when property is certified to be in a flood zone.  All property obtaining financing must be certified to determine if it is deemed to be in a flood zone.  Flood insurance for property in a flood zone must be obtained through the federal government whereas, other property may obtain flood insurance as additional coverage through the hazard insurance company.

 

Credit Life Insurance: Optional term life insurance where the death benefit of either of the mortgagors is equal to the outstanding mortgage balance, decreasing as the loan is paid off.

 

Mortgage Insurance:  Required on all FHA loans (MIP) and any conventional loans (PMI) with a loan to value (LTV) ratio of more than 80%.  Mortgage insurance covers the mortgage company against loss resulting from a foreclosure.

 

Home Warranty:  Optional service plan which pays for the repair or replacement of covered systems (plumbing, heating, electrical systems, and major built-in appliances.  The warranty may be purchased by either the buyer or the seller.)

 

New Home Warranty:  Optional and is not automatically included on all new residential construction.  Any warranties should be in writing between the buyer and builder and are generally for one year but may be for longer.  Additional coverage or third party coverage is available but covers only major structural problems and is remedied by the original builder when possible.