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Flood Insurance Flooding is not covered by a standard homeowners insurance policy. To determine if you need flood insurance, ask your insurance professional, mortgage company or
neighbors about the flood history in your area. If there is a potential for flooding, you should consider purchasing a policy that covers the structure and your personal belongings. Flood insurance can be purchased
from an insurance agent or company under contract with the Federal Insurance Administration (FIA), part of the Federal Emergency Management Agency (FEMA). Flood insurance is only available where the local government has
adopted adequate flood plain management regulations under the National Flood Insurance Program (NFIP).
Title Insurance A policy of title insurance is a contract of indemnity between the insured and the insuring company
relating to the title to the land described in the policy, protecting the insured against loss of damage by reason of defects, liens or encumbrances of the insured title existing at the date of the policy and not
expressly excepted from its coverage. The policy is issued after a complete search and examination of the public records and shows the condition of the record title, including any money obligations outstanding
against the property, easements and other matters which may affect the rights of ownership, possession and use of the property. Title insurance protects the "record" title, insuring it is good subject only
to the exceptions expressly set out in the policy. lt also insures against certain matters which do not appear of record, such as forgery, identity of parties, incompetence of former owners, interest of missing heirs,
and status of individuals not having the "right" to sell property. There are different types of policies. Owners policies are issued to real estate owners. Purchasers policies are issued to purchasers of
real estate under contract. Mortgage policies are issued to mortgage companies. In addition there are several other special forms of policies. There is a type of policy to meet the requirements of almost any form of
real estate transaction. Homeowners Insurance When you insure your home, you should insure your home for the total amount it would cost to
rebuild your home if it were destroyed. If you don't have sufficient insurance, your insurance company may only pay a portion of the cost of replacing or repairing damaged items.
There are three ways to insure the structure of your home:
Replacement Cost: Insurance that pays the policyholder the cost of replacing the damaged property without deduction for depreciation, but limited to a maximum dollar amount. Guaranteed Replacement Cost:
Insurance that pays the full cost of replacing damaged property, without a deduction for depreciation and without a dollar limit. This coverage is not available in all states and some companies limit the coverage to
120 percent of the cost of rebuilding your home. This gives you protection against such things as a sudden increase in construction costs due to a shortage of building materials. Actual Cash Value: Insurance
under which the policyholder receives an amount equal to the replacement value of damaged property minus an allowance for depreciation. Unless a homeowners policy specifies that property is covered for its
replacement value, the coverage is for actual cash value.
For a quick estimate of the amount to rebuild your home, multiply the local building costs per square foot by the total square footage of your house. To find out the building rates in your area, consult your local
builders association or real estate appraiser. Factors that will determine the cost to rebuild your home:
- local construction costs
- the square footage of the structure
- the type of exterior wall construction -- frame, masonry (brick or stone) or veneer
- the style of the house (ranch, colonial)
- the number of bathrooms and other rooms
- the type of roof
- attached garages, fireplaces, exterior trim and other special features like arched windows.
Also be sure to check the value of your insurance policy against rising local building costs each year. Ask your insurance agent or company representative about adding an "INFLATION GUARD CLAUSE" to your
policy. This automatically adjusts the dwelling limit when you renew your policy to reflect current construction costs in your area. Also, be sure to increase the limit of your policy if you make improvements or
additions to your house. Private Mortgage Insurance Private mortgage insurance is a type of insurance that helps protect the mortgage company
against losses due to foreclosure. This protection is provided by private mortgage insurance companies and allows mortgage companies to accept lower down payments than would normally be allowed. Private mortgage
insurance also enables mortgage companies to grant loans that would otherwise be considered too risky to be purchased by third party investors like the Federal National Mortgage Association (FNMA) and the Federal Home
Loan Mortgage Corporation (FHLMC). The ability to sell loans to these investors is critical to maintaining mortgage market liquidity, which in turn, allows mortgage companies to continue originating new loans.
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