Does this sound familar?  You just bought a home it's days before closing and you get that last minute call, it's the lender!.  They tell you, the underwriter reviewed your loan and everything looks O.K. But ...  your home insurance policy you just bought is noit enough coverage. You respond back in panic "But that's what the insurance agent said it would cost to replace my home! "    "You need to have at least the same amount of insurance coverage as your loan amount in order to close on time"  your lender warns.  You don't want to lose your rate lock due to a delay and you certainly don't want to delay escrow!  Remember  theres the movers, etc... So you call your insurance agent, and they do as you say.  What's wrong with this picture?

PLENTY!!!! IT IS ILLEGAL to require your client get coverage to cover the loan amount in CALIFORNIA !!! and in most states!.  What is illegal about it?  Making you get insurance above and beyond the cost to replace your home in the event of fire or other catastrophic event that is covered by your policy.  Irregardless of what your home is worth the cost to replace it has no connection to your loan amount.  Let me repeat this the cost to replace your home has no connection to your loan amount.  As I review clients  policies I run into this practice more often than I like.  A few (small minority) of insurance agents intentionally pull a "sargeant shultz"  I know nothing and turn away as it is in their financial interest to overinsure their clients.  Most don't and I have made it a personal crusade to educate my clients on how to address this with their lender to get reimbursed for the overpayment of premiums.  That alone has saved my clients from hundred's to thousands of dollars they overpaid before I even discuss my new insurance proposal and what we can do for them .

A warning to consumers, if your agent simply does what you tell him/her, and only focuses on the price of your insurance premium.  Run!   You are getting what you paid for NADA, Zippo. 

Your Insurance agent should be an advocate on your behalf and educate you on these types of issues. 

Do you love your Insurance agent?

When you get that reimbursement check you will.

May the source be with you

All comments, opinions, expressed are simply my own and do not reflect those of the entities I represent as an Independent Agent.

All Rights Reserved  Pablo Santibanez Copyright 2008