You look in your mailbox and see a letter from your mortgage lender. You open it and discover that your mortgage payment will increase by $ 100 per month because the lender has put mortgage insurance (AKA "compulsory" insurance) on your home. WHAT ?????
What is compulsory insurance? It is an insurance that covers the mortgage lender's interest in a property. IF a mortgage lender has to buy this policy to protect its interest, you will be charged for the premium. It is normally added to your mortgage. A lender uses compulsory insurance to ensure that their security (property) is insured in the event of damage or loss of property so that they get paid for the damage.
Here are the three most common reasons why a lender puts mortgage insurance in your home:
1. You have no property insurance, either because you did not buy an insurance OR the insurance is canceled.
2. The lender has not yet received proof of property insurance.
3. The amount of coverage, deductible or type of coverage does not meet the lender's requirements (note – this situation occurs much less often than nos. 1 and 2).
We will talk about each of the next three.
Cause 1: A mortgage lender puts mortgage insurance on your property: You do not have insurance or your insurance is canceled have seen any situations where proof was not required to close the loan. However, you can bet on your lower dollar because eventually proof will be required and when it is not shown they will buy the compulsory insurance.
What if you have the policy canceled for non-payment? Or how about it being canceled by the insurance company because repairs were not made? Or even to increase the risk? No insurance is no insurance, so again, compulsory insurance is the answer here.
Obs! Insurance companies are not really happy to insure a property that currently has no insurance on it, especially if you let it be canceled or if it was canceled by the insurance company for some reason, so it can be difficult to get a policy when you need it.
Reason # 2 a mortgage lender puts a mortgage on your property: Evidence of current insurance has not been received
There may be a million reasons why this happened. Maybe the loan was refinanced and someone forgot to tell the insurance company . If you are refinancing with a RESPONSIBLE lender, we obviously need the new information to update the policy with the right mortgage lender information so that the certificate is sent. a thought to tell the insurance company. Of course, they would never get it.
Cause 3: A mortgage lender puts a mortgage on your property: The insurance does not meet their requirements
For example, the mortgage is $ 200,000, but the current insurance only insures the house for $ 150,000. The lender may become a squirrel and demand a policy that insures $ 200,000 (this is a situation that is worth a separate blog post). So they charge a $ 200,000 policy and you are charged. Again, this reason happens much less than the previous two, but it is really possible.
How does the insurer work?
For any of these situations, the lender will sign an insurer policy to cover their interest in the property. It is SUPER important to note that the power plant ONLY covers the home. It does not cover outbuildings, personal content and liability protection. So do not fall under the assumption that the mortgage policy also covers you. It does not. If there is a fire and your personal belongings are destroyed, you are in luck. If someone is injured on your property, you are not lucky.
Here are possible solutions to the three situations mentioned above …
Solution # 1- You have no insurance or your insurance is canceled
If you have a relationship with an existing insurance company or agent (tell others types of insurance), start there. Explain your situation – why no insurance or why the insurance was canceled. Depending on the circumstances and your current relationship, it is possible that something can be done. Honesty is really your best policy here – if you fully explain your situation, chances are you can get a policy. And any regular homeowner policy is far cheaper than a mortgage policy. PLUS, you also get your personal belongings and responsibilities covered.
If you do not have a current relationship with an insurance agent / company (clue, clue;) you must contact others, but again, be honest in your statement. If they do not know the situation, it is impossible to know if you can get help.
Solution No. 2 – Proof of current insurance has not been received
99% of the time it is simply a matter of updating the existing information about the mortgagee. If the mortgage has been refinanced with another lender, your agent or insurance company needs that information to update the policy so that proof of insurance can be sent.
Or maybe the current mortgagee has changed postal address. If we do not know, we can not change it (and we can not send the necessary evidence).
With most of these changes, the message from the lender is sent to you, in some way, in some way. We need that information.
A simple phone call to your insurance company or agent will usually solve the problem. We are pretty sure that you do not want to pay your regular homeowner insurance premium PLUS an insurance premium (which is usually HIGH).
Solution No. 3- The insurance policy does not meet their requirements.
This can be one of many things. A phone call to the lender to find out the exact problem with the current insurance would be the recommended solution. Depending on the cause, it may be easy to resolve or more difficult. And then when you know, contact your insurance company or agent to discuss solutions.
These are the most common reasons why your mortgage company puts mortgage insurance on your home. If you have a relationship with an insurance company or agent, start there for a solution. And if you do not have or do not have the relationship you want? Then it's time to start. We can help with many types of insurance, including homeowners. Call us at 937-592-4871 or request a quote today!