Since just about every loan I do I get asked if there is anything special the homeowners insurance needs to contain I thought I'd write something brief. While most standard homeowners insurance policies will do the trick, there are a few things to keep in mind.

• Coverage typically needs to be for at least fire and extended coverage
• Amount of the coverage must be at least equal the lessor of 100% of the insurable value of the improvements (usually determined by the cost approach on the appraisal, sometimes lenders will accept the property insurer's determination) or the unpaid balance on the mortgage with a replacement cost endorsement for full amount of damage (this is important to know when you go to refinance, especially a cash out refinance, as your premium usually will increase)
• Insurance company usually needs to be rated BBB or better; A or better in Demotech, Inc.'s Hazard Insurance Financial Stability Ratings; B or better in Best's Insurance Reports.
• Coverage through the state's insurance plans are acceptable if the insurance is the only insurance available (such as in the times of insurance moratoriums)
• Generally the maximum dwelling deductible for homeowner insurance and flood insurance cannot exceed the higher of $1,000 or 1% of the face amount of the dwelling coverage (unless a higher max amount is required by law, this is primarily so homeowners aren't faced with a huge expense if something were to go wrong with their home and also to prevent cheaper premiums in order to qualify for "more" of a home)
• Be sure to keep your homeowners insurance updated with your lender and within their guidelines at all times. If you fail to do this if you switch insurance companies, change policy #'s, reduce coverage below minimum requirements, etc. you may be forced to use your lender's homeowners insurance company. This is called "forced placed insurance" and it ain't cheap.

Shane Milne

Loan Officer

Banner Mortgage

949-273-4161 phone

www.thebesthomeloans.com