Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Once a buyer and seller agree on a price, a title company normally begins the process of escrow. The purpose of this procedure is to legally transfer the property. In the process the title company makes sure that the seller has the right to sell the property to the buyer and that all liens against the property have been satisfied.
When the title company is ready to transfer the deed to the buyer the title company then look to the buyer to make sure that the money for the sale is actually available. In most cases the purchase requires a mortgage. In their negotiations with the mortgage company the subject of homeowner’s insurance is opened.
The mortgage company requires that a home for which they are going to loan money has enough insurance to protect their interest. This is compounded if there are multiple lenders. The way that this is normally done is that the buyer provides evidence of a homeowner’s policy that insures the house at the cost of replacement and names the mortgage company as the mortgagee.
An agent normally draws up the homeowner’s policy at the direction of the mortgage company in coordination with the title company. When this is done in direct communications there are rarely any difficulties. The policy that is ordered has been “pre-approved” by the lender and the policy starts on the day that title changes, thanks to the title company.
The term for loans where the owner’s equity is small normally requires that an escrow account be established. This escrow account pays the property taxes and insurance for the home. Money for the opening of the escrow account is a part of the closing costs. This means that the annual premium of the homeowner’s policy is paid when the title passes. The escrow account collects money throughout the year to enable it to pay the insurance company and the taxing authority when billed. This causes slight changes from time to time in the monthly payment that the mortgage company requires.
The owner of the home can change insurance companies whenever he or she deems it appropriate. The amount of coverage is still subject to the requirements of the lender. Because the cost of constructing a house does not necessarily equal the price paid for a house this requirement is sometimes difficult to balance.
When a change of policies is made the existing insurance company must be notified. Usually evidence of insurance provided by the newly appointed insurance company will satisfy the lender and the previous insurance company. This transition isn’t always smooth and does require monitoring. Escrow withdrawals can be made to two insurance companies providing insurance on the same building. This presents many problems not the least of which is the fact that the cost for insurance has doubled.
Most insurance companies will cancel a homeowner’s policy upon request. Most will cancel the policy effective the date of the replacement policy. Most companies will refund any unused premium on a pro rata basis. Some companies may use the “short rate” cancellation procedure. This procedure makes cancellation slightly more expensive.
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When the title company is ready to transfer the deed to the buyer the title company then look to the buyer to make sure that the money for the sale is actually available. In most cases the purchase requires a mortgage. In their negotiations with the mortgage company the subject of homeowner’s insurance is opened.
The mortgage company requires that a home for which they are going to loan money has enough insurance to protect their interest. This is compounded if there are multiple lenders. The way that this is normally done is that the buyer provides evidence of a homeowner’s policy that insures the house at the cost of replacement and names the mortgage company as the mortgagee.
An agent normally draws up the homeowner’s policy at the direction of the mortgage company in coordination with the title company. When this is done in direct communications there are rarely any difficulties. The policy that is ordered has been “pre-approved” by the lender and the policy starts on the day that title changes, thanks to the title company.
The term for loans where the owner’s equity is small normally requires that an escrow account be established. This escrow account pays the property taxes and insurance for the home. Money for the opening of the escrow account is a part of the closing costs. This means that the annual premium of the homeowner’s policy is paid when the title passes. The escrow account collects money throughout the year to enable it to pay the insurance company and the taxing authority when billed. This causes slight changes from time to time in the monthly payment that the mortgage company requires.
The owner of the home can change insurance companies whenever he or she deems it appropriate. The amount of coverage is still subject to the requirements of the lender. Because the cost of constructing a house does not necessarily equal the price paid for a house this requirement is sometimes difficult to balance.
When a change of policies is made the existing insurance company must be notified. Usually evidence of insurance provided by the newly appointed insurance company will satisfy the lender and the previous insurance company. This transition isn’t always smooth and does require monitoring. Escrow withdrawals can be made to two insurance companies providing insurance on the same building. This presents many problems not the least of which is the fact that the cost for insurance has doubled.
Most insurance companies will cancel a homeowner’s policy upon request. Most will cancel the policy effective the date of the replacement policy. Most companies will refund any unused premium on a pro rata basis. Some companies may use the “short rate” cancellation procedure. This procedure makes cancellation slightly more expensive.