When to check on Homeowner's Insurance when buying a home...

Tuesday, 29 May 2012 12:15

It is very common for homebuyers to wait until the last second to solidify their homeowner's insurance which often leads to:  Premiums at unexpected amounts causing the payment to be higher than expected which could potentially cause a debt ratio issue late in the process.  The agent could require that payment be made prior to issuing an insurance binder which causes a delay in the closing package being sent to the attorney.  Often a buyer will get a quote only from an agent but not finish the paperwork so when the mortgage company calls the insurance agent, they are not able to issue the insurance binder.
Best Practice for securing homeowner's insurance or flood insurance:
1)  When looking for homes, check with a few insurance agents familiar with the market and decide on an agent that has good insurance rates, coverages, knowledge, and follow-up. If you decide on an agent early you can ask for quotes on a few houses you have narrowed down to so your mortgage lender can give you more accurate payments and/or amounts to be paid by the seller in the contract.
2)  Once under contract for a property, let your agent know so that they can begin working on the actual insurance application and discuss coverages with you.  Pass this information along to your mortgage loan officer. 
3)  Ask the agent if you have done everything he/she needs you to do such as sign the application, possibly pay a deposit, etc
4)  If flood insurance is required you may have to order a flood elevation certificate to determine the flood level in relation to the base and floor level of the house as well as which zone the property is located in.  This will determine your flood insurance premium.
5)  When you receive your appraisal by email from your mortgage lender, forward it to your insurance agent so they have more information on the property such as the Marshall Swift Cost Approach so they see how much insurance would be required to replace the dwelling if there is a complete loss.
6)  Make sure your agent knows the closing date as soon as it is known.  This is needed for the insurance binder which the lender will need for closing.
7)  Make sure your mortgage loan officer and insurance agent are in communications.  The insurance agent will need the mortgagee clause and loan number to be listed on the insurance policy.  The insurance agent will need to know if the policy will be paid by an escrow account and any specific lender requirements such as minimum dwelling coverages.
If you follow these steps, it is just another way of avoiding delays or surprises of your closing.