Guidelines to Choosing Homeowner’s Insurance in Florida

Lenders find it necessary for you to pay your homeowner’s insurance at closing especially when mortgage financing is also involved. The lender may subsequently require you to secure and prepay within its recommended minimum standards for them to cover you. Different loans come with different closing amounts. Most homeowner’s insurance policies cover the first year of ownership where you pay premiums upfront or out of escrow or at closing among other settlement fees.

THE BASICS

The relevance of homeowner’s insurance only comes in when both the borrower and lender interests require protection. The average annual premium in Florida as of 2014 was $770 – $800. Most insurance companies cover clients when particular events happened. Minimally, lenders expect a standardized policy covers rebuilding costs and replacement of main components. It is the choice of the homeowners to add to their coverage for events such as hurricanes or flood (which requires an additional policy). These additional coverages significantly increase any premium in most parts of Florida.

UPFRONT PAYMENT

It is important to order homeowner’s insurance immediately before you close on your home. You pay your premium upfront, before closing which allows exclusion of the premium from all closing costs. Closing costs may be comprised of lender, as well as, third party fees in addition to the down payment. The average fees in 2014 were $3,850. Most insurance companies allow your payment via credit card or bank transfer. However, using a credit card is advantageous as it allows for break up or postponement of payment. The problem with using it is though, is it could harm your loan since the additional credit card debt might cause an exceeded lender guideline when they compare your loan’s debt-to-income ratio. As such, most credit card companies choose to re-pull your credit score to ensure you do not incur any significant debt before closure.

CLOSING

Homeowner’s insurance companies normally require you to pay at closing with certified funds such as wire transfer or cashier check. This proves the money comes straight form you and not borrowed. The advantage with paying through closure gives you a platform to negotiate with the seller whether to pay in portions or in full. It is therefore important for seller concessions to be put in a contract as they exist as a sale condition. Normally, most lenders allow sellers to pay at most six percent on behalf of their buyer’s. This range of payment varies depending on the type of loan as well as the down payment amount.  Even better, you should consider using the seller’s monetary concession to cover for insurance premium at closure.’

CONSIDERATIONS

It is important to take note there are particular insurance costs only paid at closure. Loans involving at most 20 percent down payment, require the lender to escrow, sometimes impound on property taxes as well as homeowner’s insurance. Therefore, the lender has the benefit of determining the period for paying your premiums to establish escrow impound reserves by the time you reach closure. These reserves could be used to pay your insurance provider in case you miss some of your payments. Most lenders are careful to prorate your premium on the closing month. The disadvantage, however, is it may increase your monthly premium payments on the closing costs. Buying a home is very exciting, but before you start getting ideas about a homeowner’s policy, understand its advantages and disadvantages and don’t go it alone.  Make sure you contact an agent to discuss all the options and intricacies of the policies.

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Locally Owned, Casual Approach, Professional Results

Pablo Beach Insurance Group has been proudly serving our local communities since 2005. While we are serious about providing the right insurance coverages to protect what matters most to you, we still embody the Florida lifestyle.