What to Ask When Shopping for Homeowners Insurance

What to Ask When Shopping for Homeowners Insurance


Being an informed consumer means not only reading your homeowners insurance policy closely, but also asking experts what constitutes the right type, and amount, of coverage you need for your home, according to the Insurance Information Institute (I.I.I.).

A qualified insurance agent or insurance company representative can guide you in your choices. Here are six basic questions the I.I.I. advises everyone to ask before buying or renewing a homeowners insurance policy:

How much would it cost to rebuild my home in its current location in the event of a total loss? Your homeowners insurance policy should cover the cost of building a new home from scratch. Your insurance agent or insurance company representative will have knowledge of your neighborhood, and familiarity with the construction materials used when your home was originally built and can accurately calculate this cost. In general, homeowners policies cover partial or total damages caused by fire, hurricane, hail, lightning or any other disaster listed in your policy. Flood and earthquake-related losses must be insured separately because both perils are excluded in standard homeowners insurance policies.

How much is the personal property in my home worth in the event of a total loss? Your homeowners insurance policy should cover the cost of replacing all personal property (furniture, appliances, clothing) should it be stolen or destroyed by fire, hurricane or another insured disaster. Most companies provide personal property coverage equal to about 50 to 70 percent of the amount of insurance you have on the structure of your dwelling. So if you have $100,000 worth of dwelling protection, most insurers would recommend $50,000 to $70,000 worth of personal property coverage. The best way to determine if this recommendation is appropriate for your specific situation is to conduct a home inventory. Consider using the I.I.I.’s Know Your Stuff® - Home Inventory app in the iTunes App Store.

How much liability protection do I need? Liability covers you against lawsuits for bodily injury or property damage that you, or your family members, cause to other people. It also pays for damage caused by your pets. The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit of your policy. You are also covered not just in your home, but anywhere in the world. Liability limits generally start at about $100,000. Most insurance agents and company representatives recommend that you purchase at least $300,000 worth of liability protection. If you have significant assets and need more liability protection than is offered under the standard homeowners policy limits, ask your agent about umbrella liability.

What level of additional living expense coverage do I need? The Additional Living Expenses (ALE) provision is found in standard homeowners insurance policies. It pays for the costs of living away from home if you cannot reside there due to damage from an insured disaster. ALE covers hotel bills, meals and other expenses over and above your customary living expenses. ALE coverage differs from company to company. Many policies provide coverage equal to about 20 percent of your dwelling protection. For example, if the structure of your home is insured for $100,000, you would have $20,000 of ALE coverage. Some companies impose a time limitation, such as 12 to 24 months.
Should I buy a separate flood and/or earthquake insurance policy? There were numerous flooding events and earthquakes in the U.S. in 2011, but relatively few Americans had coverage for either type of natural disaster because these perils are excluded from standard homeowners insurance policies. Check with your insurance agent or insurance company representative to see whether you might need specialized coverage beyond your standard homeowners insurance policy.

Do I qualify for any discounts? If you have smoke detectors, burglar alarms and/or dead-bolt locks in your home, you can often get a premium rate discount. Sophisticated sprinkler systems and alarms that ring at monitoring stations often reduce your homeowners insurance premium, too. Ask your agent or company representative about discounts available to you. If you are at least 55 years old and retired, for instance, you may qualify for a discount of up to 10 percent at some companies. If you have completely modernized your plumbing or electrical system recently, a few companies may provide a price break.

How To Spot A Mortgage Scam

How to Spot a Mortgage Scam



While the landmark $25 billion National Mortgage Settlement was just announced last month, scammers have wasted no time capitalizing on the vulnerability of desperate homeowners.

The settlement with the nation’s five largest mortgage servicers was signed by federal and state officials Feb. 9, and will provide assistance for homeowners in order to compensate for the faulty foreclosure practices offered by mortgage servicers following the housing market crash. According to the nonprofit credit-counseling agency Money Management International (MMI), although real compensation is still months away, there have already been numerous reports of scam operations popping up across the country.

“While the government has been cracking down on foreclosure scams, it is important for you to remain diligent in keeping your personal information safe,” advises Jo Kerstetter, vice president of education and community relations for MMI.

Kerstetter offers the following tips to help avoid a scam:

Don’t panic. Mortgage scams are effective because the scammer is able to exploit the fear of a person who is in a desperate, vulnerable state. Don’t let fear cause you to make irrational decisions.
Never act under pressure. Don’t sign a contract or disclose information before doing your research. You can always request to receive any information in writing.
Trust your gut. If someone is offering you something that sounds too good to be true, it probably is.
Stay informed. Make sure you obtain detailed information about your foreclosure deadlines. If you want to know if you qualify under the Settlement, contact your bank or loan servicer directly.
Don’t release any personal financial information. If you are contacted by someone who claims to be from your financial institution and wants you to “confirm” or help them identify your personal account information, it is likely a scam. Rather than releasing information, ask for their contact information and tell them you’re going to call them back.
There is no fee involved in the National Mortgage Settlement. If you are contacted in any way from someone asking for money in return for a speedy settlement payment, they are scamming you.
For more information about mortgage assistance relief scams, visit FTC.gov. If you have questions or concerns about your mortgage loan, consider meeting with a HUD-certified housing counselor to discuss your options.

Financing in Today's Mortgage Market...

ALL I WANT TO DO IS BUY A HOUSE! - a good article about today's mortgage market.
Years ago, when someone applied for a mortgage they had to have money in the bank and proof of just about everything.  Then, somewhere along the way, lenders relaxed their lending requirements, didn't follow up to verify income or debt, and lent money just based on the value of a home.  Due to the mortgage meltdown, those days of just filling out an application and expecting to get a mortgage are gone.  The reality if you want to by a home?  It is a great time... low rates, low prices.  But be prepared to be able to show proof of income, show months worth of bank statements, tax returns and other various documents to prove to a lender that you are credit-worthy.  Lenders will also want to see money for a downpayment and closing costs readily available.

Realty Times - FHA's Rehabilitation Program

Realty Times - FHA's Rehabilitation Program

This is a good article about the FHA's Section 203(k) loan program.   For a homebuyer (investors are not eligible) seeking a "bargain" home that may need to be completely renovated, this program may offer an option that lets homebuyers finance both the purchase price of the home and the cost of renovation (rehab).  There are restrictions on eligibility, how much can be borrowed, time period for construction, etc. For more information, see the information listed under "Home Improvements -- Federal Loan Programs" on HUD's website: http://portal.hud.gov/portal/page/portal/HUD/topics/home_improvements