Insurance Explained

Homeowners Insurance Explained

Definition
Homeowners insurance protects both the owner and lender against loss due to fire, flood, or other natural disaster.

Amount of Coverage
Lenders want coverage to meet the lesser of: the loan amount or the replacement cost of your home

Replacement Cost
The replacement cost of your home is easily determined, as it is estimated on the property appraisal. Remember, this replacement cost is often less than your loan amount. As the insurance company will only reimburse you for the actual cost of replacing damaged property, there is little need to carry more coverage. You do not need to have coverage in the amount of your loan if your your loan exceeds the replacement cost.

Your Premium
Your insurance premium is based on the amount of policy coverage, and the rates set by your insurance company.

Lenders estimate the cost of your premium - you are encouraged to find the most competitive insurance premium available.

Buying or Renewing Your Policy
You must provide proof of insurance if you are purchasing a home. If refinancing, the lender will require that there be at least six months remaining on your policy, counting from the 1st mortgage payment due.

Your insurance agent will work with you and the escrow officer or closing agent to provide the proper evidence of insurance.

Flood Insurance
Flood insurance is required if your property is located in a flood zone as mapped by the Federal Emergency Management Agency (FEMA).

Earthquake Insurance
In most cases, earthquake insurance is not required.

Condominiums
Condominium associations carry a Master insurance policy which covers all of the living units. Evidence of this policy is sometimes sufficient to the lender, and is usually provided by the Homeowners Association representative. There is no requirement that six months of coverage remain on the policy at the time of loan funding. However, condominium owners are usually required to carry a separate policy as well. This policy, known as an HO-6 or "walls in" is specific tocondominium units. What is it? It's an insurance policy that covers the interior of the condominium unit - items such as appliances, fixtures, and personal property.


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Equal Housing Lender. Copyright 2024 Mark Leaver. All rights reserved. Terms and Conditions of Use. Read our privacy statement. CA Department of Real Estate, real estate broker, license 01006840. NMLS ID# 278620 and 364089. Rates appearing on the Loanlane web site are subject to change and are intended for California owner occupied single family residences only. First position liens only, fully amortizing. Mortgage rates are subject to change without notice. Mortgage rates posted on this web site apply to applicants with a minimum FICO score exceeding 720 and a loan-to-value ratio less than 60%, and require documented income and assets to comply with underwriting requirements. Loan amounts below $250,000 will have additional fees. If your FICO score is below 720, your loan-to-value ratio exceeds 60%, or you are withdrawing equity from your home (i.e. cash-out) your mortgage pricing will be marginally higher due to industry policies. All programs are underwritten to Fannie Mae underwriting guidelines. Not applicable to FHA or VA loans. Some loans may have fee adjustments based on risk factors (FICO score), or the loan size, please ask us for details. Rate locks are not lending contracts and are granted only after the receipt of a fully documented loan application. . All loans displayed on this page have no prepayment penalty, and monthly escrow of property tax and/or insurance is not required if the loan-to-value ratio is less than 80%. Loans exceeding $766,550 not available in all California counties. The information contained herein is believed to be reliable. However, we do not make any representations as to its accuracy or completeness. Any statements nonfactual in nature constitute only current opinions, which are subject to change.