Homeowner's insurance

[zoeb]

I haven't posted in a long time but I do stop in from time to time to check on Tom's advice so bare with me. I thought I read everything about buying a home but I didn't and I came upon a little annoyance with the homeowner's insurance. I recently bought insurance for the purchase price of a home and received another notice today for additional charges. These charges cover the interest being charged on the loan. Is this a normal practice? It went from an 85k purchase price to a 123K price. And, say I pay 6k in interest in 2007, hypothetically, does the insurance drop their rate to 120k the following year?

And how about some advice about the best insurance company for a home. The current one is Nationwide.

Thanks
Zoe

 

[Gilligan]

I haven't posted in a long time but I do stop in from time to time to check on Tom's advice so bare with me. I thought I read everything about buying a home but I didn't and I came upon a little annoyance with the homeowner's insurance. I recently bought insurance for the purchase price of a home and received another notice today for additional charges. These charges cover the interest being charged on the loan. Is this a normal practice? It went from an 85k purchase price to a 123K price. And, say I pay 6k in interest in 2007, hypothetically, does the insurance drop their rate to 120k the following year?

And how about some advice about the best insurance company for a home. The current one is Nationwide.

Thanks
Zoe

Zoe,
I don’t totally understand your dilemma. I have never heard of an insurance co charging you for the interest. Now I have heard of people paying $80K for a house appraised at $120K, the insurance co gives them a policy for the $120K because that is the current replacement cost of the house.

 

[zoeb]

The 120K is the payoff on the loan with interest. Actually it matches the payoff to the penny. So I called the lender asked if they had requested greater coverage and they said no. The lender is content with only 80% of the remaining 72k loan covered. And as with many new homes the insurance/taxes are paid to an escrow account, I didn't want to see the payment go up even by a mere $10 and I was certain that they would require that. Anyway is to much to ask that the insurance co. inform me of additional coverage than to automaticaly bill me for it? Most people would have paid the bill without question. I just think it's bad business to assume most people would want the additional coverage. I shopped around for the least expensive company and now I know why they were cheaper than the rest.

just my 2 cents
zoe

 

[pyriel]

The 120K is the payoff on the loan with interest. Actually it matches the payoff to the penny. So I called the lender asked if they had requested greater coverage and they said no. The lender is content with only 80% of the remaining 72k loan covered. And as with many new homes the insurance/taxes are paid to an escrow account, I didn't want to see the payment go up even by a mere $10 and I was certain that they would require that. Anyway is to much to ask that the insurance co. inform me of additional coverage than to automaticaly bill me for it? Most people would have paid the bill without question. I just think it's bad business to assume most people would want the additional coverage. I shopped around for the least expensive company and now I know why they were cheaper than the rest.

just my 2 cents
zoe

Insurance... This is really an unnecessary evil. Many banks require that you purchase a homeowners insurance for the full price of the loan amount. Sometimes, they want you to get insurance for the appraisal value of the home minus the land. Your insurance company is a sneaky one and you should watch out for them. Would I change them, I wouldn't since they are saving you alot of money.
I remember arguing with my loan officer on why should I get insurance for the full appraisal price of the property. It doesn't make sense since the land is part of that appraisal value. If you have a calamity like a tornado or typhoon and your house is destroyed, the insurance will only replace you for the amount of the house since the land is still there. Many loan office don't understand that. Just my two cents...