Call: 203-637-6655 or email – Kyle Shepard

House on Coins

September 14, 2021

September 14, 2021 Posted by: Category: Home Insurance No comments

Basic Homeowner Policies Are No Longer Acceptable

For years, independent insurance agents stood by with wonder about the lack of concern mortgage companies have for the type of insurance a buyer uses to insure their new home and secure the mortgage.

“Mortgage companies are now initiating higher standards of coverage to secure that attractive rate.”

Is This Changing?

Mortgage companies are now initiating higher standards of coverage to secure that attractive rate.

  • Policies must now include Guaranteed Replacement Cost coverage. Our estimate is that 90% of home insurance policies written today have a limited replacement cost endorsement that includes a cap on the recovery. Those policies will not be acceptable under new mortgage terms.
  • Coverage for wind and hail will also need to be confirmed with identifiable deductibles. Most homes within 5+ miles of the coast include a separate wind deductible. Most deductibles are 2% of the dwelling coverage, but some may be as high as 5%. Insuring a coastal house to rebuild for $5,000,000 that includes a $250,000 wind deductible may be unacceptable to the mortgage company! Options exist to buy down the deductible, but at an added significant cost.
  • And finally, mortgage companies are now asking for the methodology used in calculating the rebuilding value or replacement cost. This replacement calculation is also required to be included to support the mortgage.

These changes to mortgage requirements have been a long time coming, and as storm frequency and intensity evolves, we expect this list of requirements to continuously grow.

If you have questions about your client’s mortgage requirements, drop Kyle an email at kshepard@shepardinsgrp.com for some support.


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