Home Owner Insurance Is A Necessary Buy

There's little doubt that home owner insurance can be pricey, but going without it can cost a home owner a lot more than a thousand or several thousand a year in premiums. It should be considered as vital a purchase for a home as electric, furniture and a new roof when it's needed.

Why is this? The reasons to make sure your house insurance is current and stays that way are, in fact, quite many. They include:

* Mortgage agreement: Most mortgage companies will not finance a home loan unless there is insurance on the property. Going without home insurance can result in a default of the loan terms. This means the home owner can find themselves without a home. The expense might be an "extra" you don't want to pay for, but avoiding it just should not be considered an option.

* Property protection: A good policy covers your home in the event of some major emergencies. Consider the recent hurricanes in the Gulf Coast area and the importance of insurance should be more than evident. Covering such things as fire, storms, earthquakes and more, a good home owner insurance policy simply protects your investment in your home. In essence, this means it protects your life, too. Remember, most policies don't cover floods though, so if you need this type of home owner insurance, you'll need to check into a separate policy.

* Personal liability protection: A home owners insurance policy can also protect you if someone becomes injured while visiting your property. A slip and fall, a trip, a dog bite, a falling roof shingle and so on can all result in litigation. When an insurance policy is present, these things are covered. This takes the headache and nightmare off of you while the insurance company handles the issue.

* A place to stay: Most include clauses that give you a place to stay if major damage is being repaired on your home. In the event of a fire, tornado or so on, you might have to move out while repairs are made. Rather than having to pay a mortgage and rent, too, a home owners insurance policy frees up your bank account to simply handle the mortgage.

* Replacement of personal items: When major emergencies happen, oftentimes a lot of personal items are lost. Most home owner policies will pay for such things as furniture, electronics, clothing and so on. The replacement costs can be outrageous, but a good home owner insurance policy will handle them for you.

Going without home owner insurance is like getting a glass of water without the glass. It doesn't make sense. Even though the expense can be high, especially in risky coastal areas, the price of the policy will be worth every penny if something bad does happen.

Whether you own your home outright or a bank is involved, making sure home owner insurance is current is a very smart thing to do. You never know when tragedy will strike and having coverage is like having money in the bank.

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Understanding Home Insurance

In today's generation home insurance has created a mark among all other forms of insurance. Homeowner's insurance policy provides insurance to personal possessions including the house garage and other structures of property against certain risk factors like theft or fire.

Typical Homeowners insurance policy has two main sections.

Section 1 includes the property of the insured and Section 2 includes the personal liability coverage that needs to be insured.

At times, lender might require homeowner's insurance as part of requirement in obtaining a mortgage. While buying home insurance policy one has to keep certain important things in mind. One needs the best level of protection as well as the provisions for valuables like jewelry, computer equipment, kitchen appliances and other possessions. In order to have adequate home insurance coverage one must check with agent or home insurance company beforehand to be sure of the adequate coverage instead of relying on the coverage mandated by the bank or mortgage company. Those levels are for protecting the house only and eventually skip the protection of possessions.

While applying for home insurance the insurance company needs to know about your present occupation, employment history, marital status, date of birth and social security number. The insurer needs to check the credit criminal and insurance history. Insurance claims of past is also checked by the home insurance company. The decision to chose a specific type of homeowner's policy, deductible and how to pay for the coverage depends upon the homeowner.

There is exception to destructions like flood, earthquake and poor maintenance of house. Home insurance is needed and most lending institutions will require the homeowners to acquire a certain amount of coverage before issuing a loan to purchase property. The lender has a vested interest in property and wants to ensure financial compensation in the event of disaster. Homeowners may suffer a default of loan if they fail to carry the level of coverage needed by lender.

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Understanding Loan Insurance Policies

A loan insurance policy is also known as loan payment protection insurance or ASU insurance (which is accident sickness and unemployment insurance) and it can, providing your circumstances are right, provide you with a monthly tax free sum of money with which to continue meeting your loan or credit card repayments if you find yourself unable to work due to accident, long term sickness or unforeseen unemployment.

For a fixed monthly premium you can take out loan insurance policies to cover against the possibility that you might lose your income and be struggling to make your monthly loan or credit card repayments. A policy would begin to kick in and pay out once you had been out of work usually for 30 days or more and would continue to pay out for a period of up to 12 months - with some providers’ policies, up to 24 months.

This will give you adequate time to get back on your feet or find work.

The best way to purchase loan insurance is to buy it independently rather than alongside the loan when you take out the loan. While purchasing the cover alongside the loan is the easiest way to take the cover it is also the dearest, as high street banks and lenders charge notoriously high premiums for the cover in order to make big profits. However, there is another possibility when it comes to taking the cover and that is to go to a standalone provider. They will more often than not offer the cheapest premiums for loan insurance policies.

Loan cover can be taken out just to guard against accident and sickness only, unemployment only or to cover accident, sickness and unemployment. You have to make this clear at the outset when it comes to buying the loan insurance to ensure that you get the protection you need.

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Home Mortgage Insurance - Piggyback Loans Putting Mortgage Insurers in the Trough

Because home prices have made twenty percent down payments impossible for legions of first time home buyers, a dual-loan concept has evolved for home financing that has made home mortgage insurance companies very unhappy. Also known as ‘private mortgage insurance (PMI), this policy is required of every home buyer who is taking out a mortgage of more than eighty percent of the home purchase price. The policy protects the lender against default, while the borrower pays the mortgage insurance premium. The policy is required until the mortgage is paid down to seventy eight percent of the home’s appraised value.

Home mortgage insurance can be expensive: as high as $1,500 per year on a $200,000 home. Divide that by twelve and you have the addition to your monthly mortgage insurance premium. In order to get around PMI, lenders have been offering dual loan packages with a mortgage of eighty percent of the purchase price and a second loan, called a piggyback loan that covers whatever portion of the 20% down payment that the borrower cannot meet. Thus an 80-15-5 loan package is an eighty percent mortgage, a fifteen percent piggyback loan and a five percent down payment.

While the additional loan will be at a higher rate than the mortgage, the interest on that loan is deductible whereas the premium on mortgage insurance is not. As a result, it is often cheaper to opt for the piggyback loan than mortgage insurance. According to one estimate, forty percent of all home purchases with down payments of less than twenty percent now opt to avoid home mortgage insurance.

Even though the borrower is paying closing costs on two loans, avoiding home mortgage insurance is still a better deal in the short run. Whether or not it’s a better deal in the long run depends on several variables. If the buyer is going to be in the home for a long period of time, he may be better off with the larger mortgage at a fixed rate and paying the mortgage insurance premium until he has sufficient equity. Eventually, the cost of the insurance premium will cancel out.

That process could take several years however, and if a buyer is not going to be in the house for an extended period the choice of dual loans and dual interest deductions may be a better bet – particularly if the principal mortgage is an ARM. Home mortgage insurance companies have responded by hurling insults at all things “piggyback” and by introducing products such as mortgage insurance premiums that are folded into the loan interest rate by raising it a quarter point or some similar amount.

With this design the lender pays the mortgage insurance premium. Because it’s folded into the mortgage premium, the policy premium may be deductible as interest. The policy can’t be cancelled in this model, however; in order to remove it from the mortgage you have to refinance. Home mortgage insurance companies have been lobbying Congress aggressively to provide deductible status for their product.

Home Equity Refinance

Home equity refinance can come in handy when your main objective is to pay off your credit card debt or you want to remodel your home. The best part about home equity refinance is that you get the much-needed cash very quickly and that too without any problem. This is not the case with traditional refinance where you need to fill lots of application forms and go through various procedures.

No closing costs-

Another good thing about home equity refinance is that you don't need to pay any sort of closing costs for the loan. However, there are few financial institutions that will charge you few dollars for processing the loan but it is still quite low as compared to other loans.

Private mortgage insurance-

Don't opt for private mortgage insurance because not only it is useless but also quite costly in nature. You have to pay private mortgage insurance if you borrow against your home for more than 80 per cent of the value. You can avoid private mortgage insurance by going for a home equity loan, where you can borrow up to 100 per cent of the equity you possess.

Low interest rates-

Equity loan market is quite competitive in nature. Because of this, there is not much of a surprise that you can clinch the best equity loan deal with low interest rate by shopping around and comparing lenders. Local financial institutions are the brilliant source for these kinds of loans. In some cases, big national lending companies can also help you immensely.

Home Insurance

Insurance is a contract between the insured and an insurance company that protects against the risk of large and calamitous loss.

The importance of home insurance cannot be undermined. There are two primary reasons why home owners buy home insurance. Firstly, a home is the most important asset belonging to a home owner, and the need to protect it is imperative. Secondly, mortgage lenders require home owners to own insurance to protect the lender’s investment form damage or loss.

The major risks covered by home owner’s insurance are:

Damage or loss to the home and other structures included on the property
Damage or loss to personal property items in the home
Injury or harm to third parties who come to your home
The home insurance covers the person insured and the members of his home. Third parties who come to your home are also covered through the liability portion of the insurance policy for injuries. Additionally, you and your family members also have some liability protection to others even while you were away from your home.

There are two distinct types of insurance under home insurance - Title insurance and Homeowner's insurance. They protect against totally different types of risks.

Homeowner's insurance covers loss or damage to the home, structures on the property, personal contents of the home, as well as third-party liability.

Title insurance, on the other hand protects ownership interests in the real property. Title insurance is purchased to guarantee that the home owner has a good and marketable title to the property. When purchasing a home by means of a loan, lenders require you to obtain title insurance. That way they know that you have clear ownership of the real property and the home.

FHA Home Mortgage Loans: Understanding The Benefits of FHA Mortgages for Purchase or Refinance

We all try to find the best deal when shopping for a mortgage. And, you’ve probably hear of the FHA loan. FHA stand for Federal Housing Administration, and with built-in mortgage insurance, an FHA loan could help homeowners save hundreds of dollars a year.

The law requires any loan for more than 80% of a home’s fair market value or FMV to carry Private Mortgage Insurance. In fact, Private mortgage insurance costs homeowners insurance premiums ranging from $250 to $1200 per year. And, the insurance is not tax deductible.

FHA Today.com shows “The Federal Housing Administration (FHA), a wholly owned government corporation, was established under the National Housing Act of 1934 to improve housing standards and conditions. Its goal was to provide an adequate home financing system through insurance of mortgages, and to stabilize the mortgage market.”

The FHA program basically has three types of loans:

1. BASIC FHA requires 3% down payment and allows refinances up to 97% loan to value.

2. Disaster Victim Program requires no down-payment and allows 100% financing of the home.

3. Rehab-Loan Program allows borrowing above the purchase price to make home improvements.

Hopefully, you aren’t the victim of a disaster. “It is not a program reserved only for first time home buyers.” Shows FHAToday.Com. “You can buy your third or fourth home with an FHA loan. The only stipulation is that you may only have one FHA loan at a time.”

An FHA home loan is like having mortgage insurance for free. All of the interest is tax deductible according to the IRS.

For the homeowner looking to pull equity out of their home. The basic FHA program allows a home equity refinance of up to 97% of the home’s FMV. That means, homeowners are allowed to pull 17% more equity out of their home, without worrying about the extra costs of PMI. And, an FHA loan could prevent homeowners from having to carry two additional loans to pull more equity. Carrying fewer loans could mean lower interest rates and lower Combined Loan to Value Ratio. With fewer loans ands a lower CLTV, an FHA home loan could save homeowners the extra cash they need.