What is Mortgage Insurance?
Mortgage companies may require insurance coverage for the mortgage in the form of Mortgage Protection Insurance, which is often referred to as PMI. This provides coverage protection to the mortgage company in the event you fall behind on your mortgage payments.
Mortgage Insurance may provide a payment to the mortgage company in the event you are unable to keep up with payments. This might happen if you found yourself suddenly unemployed or disabled. PMI can also provide coverage in the event of death.
Who Needs Mortgage Insurance?
PMI is designed to protect the mortgage company from a potential mortgage default. Mortgage companies tend to require PMI when the homeowner purchases a home with less than 20% of the loan as a down payment. Generally speaking, you will owe PMI until you have 20% equity in your home. For instance, if your mortgage is for $200,000, you will need to make PMI payments until you have $40,000 in equity in your home. PMI rates vary depending on your credit score. You may also need PMI if your loan is through the Federal Housing Authority (FHA) or the United States Department of Agriculture (USDA).
What is Homeowners Insurance? Homeowners Insurance is also required by a mortgage company. Homeowners Insurance is needed to provide coverage in the event the home is damaged, or the homeowner is liable for damage to others. The mortgage company requires this to protect the homeowner and ensure the homeowner is able to maintain the home under difficult situations. The thinking behind this is, if the homeowner can maintain the home, the homeowner will be able to continue making payments to the mortgage company. Long & Company can help you find the right Homeowners Insurance for your needs.
Homeowners Insurance provides coverage in the event your home is damaged due to an unforeseen event such as a storm or a fire. Homeowners Insurance also provides coverage if you or a family member is found liable for an accident.
If you have not updated the amount you are insuring your home for in some time, you might want to speak with your agent. The agent can use a common industry online tool called the Home Cost Estimator. This tool goes by several other names, as well. Your agent can use this tool at your next policy review to calculate the current cost to rebuild your home in the case of a partial or total loss. Having an up to date rebuild cost can ensure, your home won’t fall short of coverage when it is needed most.
Long & Company is familiar with homeowner needs specific to Wisconsin residents and surrounding neighborhoods.
Do You Need Homeowner Insurance and Mortgage Insurance?
Mortgage companies may require you to have both Homeowners Insurance and Mortgage Insurance. The policies are slightly similar, but the coverages provided by each insurance are distinctly different. You should always carry a Homeowner Insurance to protect you and your most intimate asset – your home. You should carry Homeowner Insurance even if you do not have a mortgage on your home. If you do need to carry PMI, then it is likely you will not need to carry PMI for the life of your mortgage.
To find out more about Homeowners Insurance and Mortgage Insurance, please contact Long & Company.