Thursday, January 20, 2011

Flood Insurance - It's Expensive, But There Are Ways to Save.

Flood insurance is for some property owners a necessary evil. The property is in an area prone to flooding and flooding is excluded from homeowners policies, so an added expense. Most policies run into the thousands of dollars per year.

One way you can save money is to have a survey of the property done. The surveyor will, for a fee, come out and do a full survey of the property including an elevation certificate. The elevation certificate is specific to your property and shows how the structure is positioned on the land, where the low points are, if any of the structure is below ground level ( like a basement), etc. Once the survey and elevation certificate are completed, send a copy to your flood insurance carrier. It may take them some time to review it, in this case a little over a month, but the savings can really make a difference in your mortgage payment. A client of mine recently saved a few thousand dollars by having a survey and elevation certificate done.

Sometimes the elevation certificate is recorded with the title to the property. A trip to the county recorders office may be well worth your time.

 It may take several calls to find a surveyor that will do elevation certificates and surveys for flood insurance. I made about 12 calls to surveyors for my client and only 3 of them returned my call. What a surveyor will charge is up to them and the cost can vary from area to area and from surveyor to surveyor. The client did find a great surveyor at a price they could afford after making several calls themselves. A little persistence and patience can pay off.

Thursday, January 6, 2011

Force-Placed Homeowner's Insurance And How To Avoid It

Unless you are very lucky, you probably have a mortgage on your home. Your mortgage company, also known as a lienholder, has a vested interest in the protection of your home. If you fail to carry acceptable homeowner's insurance and a loss occurs, their monetary loss will be much greater than yours. For this reason, lienholders require that you carry homeowner's insurance. You typically won't be able to close on a purchase without it, and if it lapses, your lienholder will step in.

What Is Force-Placed Insurance?

Force-Placed insurance is a policy that your lienholder takes out on your home when your policy has lapsed or you have not provided them with proof of a policy that is acceptable to them. In order to protect their interest in the property, your mortgage company will obtain a policy and attach the payments on this policy to your mortgage. This insurance will remain in place until you provide proof of an alternate insurance policy.

Why You Don't Want It

It doesn't sound like such a bad deal to let the mortgage company handle placing insurance on your home. The problem is that this type of policy exists only to protect the mortgage company's interests-not yours. There is often little to no coverage for your personal property, and in the case of a claim you will get nothing-only the mortgage company will receive payment. In return for this limited coverage, force-placed insurance is very expensive-much more so than traditional homeowner's insurance. The lienholder usually only uses one source for this type of insurance and they do not shop for the best rate. After all, they are not paying for it, you are.

How Can I Avoid It?

First of all, make sure your homeowner's insurance coverage doesn't lapse! Make your payments on time if you do not have an impound account with your lender. If you do have trouble remembering, consider rolling the insurance in with your mortgage payment, or having it automatically withdrawn. Another important consideration is to make sure that the insurance company has accurate information regarding your lienholder, including their address. This will ensure the insurance company provides proof of insurance to the correct lienholder and there is no question that you already have insurance in place.

Force-placed insurance isn't what the mortgage company wants, nor is it the best choice for your interests. Be sure your homeowner's insurance stays in force and proof is provided so that your interests, as well as those of the mortgage company, are protected.