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Liberty Mortgage, Inc.
509 W. McKinley Avenue
Mishawaka, Indiana 46545
Telephone 257-0629
or 888-568-1786
Fax 574-257-0632
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Protecting Your Investment . . .
Understanding Insurance Options
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Insurance is a basic ingredient in most real estate transactions. From protecting lenders against
a borrower's default in mortgage payments to guarding the owner's investment from loss due to accident,
illness or death, the insurance industry can provide policies to cover all potential risks. In many instances,
a buyer must provide the lender with several different types of insurance in order to meet loan commitment
requirements. The following is a brief summary of the form of insurance that may be required in residential
real estate transactions.
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Flood Insurance
If a property is located in a designated flood zone, a lender will require
the borrower to secure a flood insurance policy. This type of coverage is not included ad part of a homeowner's
policy.
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Hazard Insurance
Hazard insurance is a type of casualty insurance that covers damage to or
destruction of the improvements from specific hazards such as fire and wind. Lenders require this type
of coverage on all properties as a condition of loan approval.
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Homeowners Insurance
In addition to protecting against damage to improvements, homeowner's
insurance protects against the loss or damage to personal property, injuries to occupants and guests,
vandalism and living expenses in case the insured premises becomes untenable. Lender's generally require
only a hazard insurance policy, but as a practical matter most buyers take a full homeowner's protection
package if they intend to live in the house.
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Mortgage Disability Insurance
A disability insurance policy makes mortgage payments when
the insured is unable to work due to illness or injury. This type of insurance is not required by the
lender as a condition of loan approval. They buyer may choose this insurance based on his/her own personal
needs.
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Mortage Life Insurance
A mortgage life insurance policy - generally a decreasing term policy
- pays off the mortgage upon the death of the insured. Again, this type of insurance is not required
by the lender, but may be obtained by the buyer based on his/her own personal needs.
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Mortgage Guarantee Insurance
Mortgage guarantee insurance protects a lender against losses
resulting from a borrower's default. In case of a default, if a foreclosure proceeding does not provide
sufficient funds to satisfy all moneys due, then the mortgage insurance company makes up the deficit.
For conventional loans, mortgage guarantee insurance - often called MI - is required when a borrower
finances more than 80% of the purchase price. For loans insured by the Federal Housing Administration
(FHA), this type of insurance is required regardless of the amount of down payment.
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More about the loan process . . . .
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