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Mortgage Insurance Requests Decoded

By March 24, 2015Blog

At Ramey King Insurance we offer insurance designed to meet the needs of your personal life. Many times a property owner will wonder why their mortgage company requires them to provide specific types of insurance, why should it matter. While we understand and sympathize with this question, the simple answer is that if certain types of insurance claims are not insured correctly, it could impair the ability of a client to be able to repay the loan or it could impair the property and damage the value of the property.

Here are some descriptions and definitions of some of the requirements we see from clients and mortgage companies.

Replacement vs. Actual Cash Value: Replacement cost is provided by endorsement. This allows the insured company to pay the replacement of the damage as compared to actual cash value. Without this replacement cost endorsement, the insurance carrier will pay the depreciated value of your claim after the deductible.

Special coverage vs. Named Perils: Special coverage means every type of perils is covered unless it is specifically excluded. Named Perils is just that, if the peril is on the policy, it is covered, if not than there is no coverage.

Deductibles: A mortgage company will want a deductible that is affordable to their client. Some deductibles that we see occasionally on distressed property or even coastal property can be beyond the ability or cash flow of clients to handle.

Coinsurance: To pay a replacement claim, the insurance carrier will require that that the property is insured to at least the coinsurance amount of replacement cost. Usually this is 80-90% coinsurance. This can be removed with an agreed amount endorsement.

Business Ordinance: This will cover additional costs that may be required by a local municipality such as requiring a building in a nonconforming zoning property parcel to be torn down if a building is damaged usually beyond 50%. This can also cover ADA compliance issues or new building requirements.

General Liability: Your mortgage company will want to make sure that any personal injury issues or claims will be handled to avoid potential judgments.

To learn more about any of the requirements above or review your current coverage one of our specialists can help! Contact Ramey King Insurance at 800-453-9691, visit our office at 320 Eagle Drive, Ste.210, Denton, TX 76201.