Home Insurance and What the Real Estate Professional Should Know

Home Insurance GlendoraGlendora Home Insurance – The infamous PITI. It’s funny, even the Insurance portion of this acronym takes the bottom of the list. Between the mortgage, taxes, HOA, utilities, and other expenses, the thought of having to pay homeowners insurance on top of it all can be a real drag for  homeowners if they don’t understand the true purpose and value behind it.

But what about from the real estate professional’s perspective? From a loan officer’s and Realtor’s view, it can also be stressful. Think about it, although homeowners insurance is usually mandatory if you have taken out a mortgage on your home, from the LO’s and agent’s perspective it’s just one more debt to add to the DTI ratio. Each additional debt/expense increases the risk of exceeding qualification ratio limits and consequently receiving a loan denial. Not to forget to mention, if the transaction is a purchase and the sales price is a bit stretched, there may be a disconnect between coverage limits and lender requirements.

That said, we also know the value and necessity behind homeowners insurance. Not only does coverage protect the homeowner and lender from losses should the property be damaged, but it protects the homeowner from liability should anyone get hurt on the property. As real estate professionals, this should be clearly communicated across to the client. Insurance is more than just another condition ordered by an underwriter.

By working with OAK Insurance Solutions you can receive that personal touch to really understand the borrower’s/client’s situation, deliver the right message, and obtain the necessary coverage to protect the home while continuing to qualify the client for their loan program.

Furthermore, you know what else stresses some professionals out? It’s understanding how to read the homeowners insurance declaration page, particularly, if they are not sure what to look for.

So what is a declaration page? In short, insurance companies provide a yearly declaration page, outlining the homeowner’s insurance coverage. The document should show who is insured on the top. This will include the policy number, the coverage period for the insurance, the name of the insured, the name of the lien holder, the property location, and the issuing insurance agency’s name and address.

Afterwards, it should also show what is insured. Also known as the rating information, this section will include details about the property to determine the premium.

Side note, we suggest that you highly recommend to your clients to review this section thoroughly each year and when a change is made to the home (i.e.  obtaining a new roof, alarm, pool, or even adding a new pet can affect your premium).

Another main component is the section indicating how much the homeowner is insured. This will present the early premium, limits, deductibles, as well as the coverages for the dwelling, personal property, unattached structures, personal liability, loss of use benefit, personal liability, and medical payment protection.

The standard protection plan covers:

  1. The Dwelling – This includes the home, attached structure, plumbing, heating and air conditioning, electrical wiring, as well as built-in appliances.
  2. Personal Property – This includes the personal belongings in the home.
  3. Unattached Structures – Examples can include sheds, detached garages, fences, driveways, patios, etc…
  4. Loss of Use Benefit – If an unforeseen event strikes, requiring the homeowner to live elsewhere while repairs are being made, the loss of use benefit will cover some living expenses.
  5. Personal Liability – If someone or their property is injured while hurt on the insured’s property, personal liability coverage will protect the homeowner from financial loss should they be sued.
  6. Medical Payment – Similar to #5, this protection will provide no-fault medical coverage to the third party injured in the home.

If you have any questions regarding coverage, reading a declaration page, or an existing policy, please do not hesitate to contact OAK Insurance Solutions.

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(626) 775-7850

Michael Martinez

Author Michael Martinez

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