As you progress through the home buying process, the question of insurance will be raised. Here are the basic types of insurance you should know something about. Be aware that most policies contain standard exclusions and exceptions.
Homeowner's insurance covers fire, theft, certain natural disasters and personal liability if someone is injured on your property. It protects the lender against the loss of the property securing your mortgage. You'll have to prove that you have adequate homeowner's coverage as a condition of obtaining a mortgage.
Several things happen behind the scenes when you buy a house. For example, Bellco Credit Union will have someone perform a title search to make sure the seller has a legal right to transfer ownership, and to see if there are liens or restrictions on the property. A lawyer, abstractor or employee of the title company does the title search.
Title insurance provides protection against financial loss in case a defect in the title turns up at some future date. Possible defects include:
- Flawed information in deeds or mortgages (like an incorrect name)
- Liens or claims against the property or the property owner (unpaid taxes or bills for water service)
- Claims to ownership from a former owner or spouse
- Invalid deeds (from a past sale or transfer by a party who didn't actually own the property)
When you acquire a mortgage with less than a 20% down payment, Bellco Credit Union may require you to buy mortgage insurance. This coverage helps protect the lender in case you can't make your payments and default on the loan. Bellco Credit Union isn't the only beneficiary. Mortgage insurance makes it possible for people with small down payments to buy the home of their choice.
Flooding is not covered by a standard homeowner's insurance policy. To determine if you need flood insurance, ask your insurance professional about the flood history in your area.
If there is a potential for flooding, you will be required by Bellco Credit Union to purchase a policy that covers the structure and your personal belongings.
Flood insurance can be purchased from an insurance agent or company under contract with the Federal Insurance Administration (FIA), part of the Federal Emergency Management Agency (FEMA). Flood insurance is only available where the local government has adopted adequate flood plain management regulations under the National Flood Insurance Program (NFIP).
This coverage can reduce or pay off your mortgage if you die before the loan is repaid. It generally is decreasing term life coverage. The payable benefit matches your mortgage balance. Consider your entire financial picture, not just your home, in deciding what life insurance protection you need.
Bellco Credit Union has a resource to help our members with their various insurance needs: