By Kyle Fitzsimmons, InsuranceAgents.com Staff Writer
Insurance of all types is based on one important factor: risk. When you apply for a loan to afford your mortgage, your lender will deem their investment to be risky if you spend 20 percent or less on your down payment. In order to hedge their bets they may require a mortgage hazard insurance policy in the event you are underinsured and sustain significant damage. Mortgage hazard insurance is protection for your lender that their loan will be covered regardless of the extent of your coverage.
Unfortunately, not all homeowners take out the necessary amount of coverage for their home’s hazard protection. For example, there are some Florida homeowners who skimp on hurricane coverage in their policies and there are some California homeowners who skimp on earthquake coverage in their hazard policies. It is unreasonable to think that your mortgage lender can double check all their borrowers’ policies to ensure they are adequately insured so instead your lender most likely has mortgage hazard insurance.
If you want to ensure that your home is adequately covered, without spending a lot of money, compare mortgage hazard insurance rates for free. It's a simple 3 step process, and you may find that you can save up to 50% on yoru homeowners insurance and still get the mortgage hazard protection you need.
First off, make sure that if you have paid more than 20 percent of your down payment with your mortgage lender or if you have a homeowners policy with appropriate hazard coverage for the area in which you live then you should not have to worry about mortgage hazard insurance. It is your job to provide your mortgage lender with evidence that you do not require mortgage hazard insurance.
However, if you fall into the category of paying less than 20 percent of your down payment or if you do not have adequate then you may have to worry about mortgage hazard insurance. Who handles it varies from situation to situation, however. Your lender could purchase the mortgage hazard insurance policy and pay the premiums while charging you a higher interest rate.
However, keep in mind that once you pay off enough of the down payment or your loan matures beyond a certain point, you should be able to drop the financial obligations that come with a mortgage hazard insurance between you and your lender.
Ask your mortgage lender today about whether or not they are equipped with a mortgage hazard insurance policy and whether or not you fit the criteria associated with avoiding it.
Published: Friday 25th September 2009
