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 firstname.lastname@example.org for some support.
Kyle’s extensive sales and account management expertise transcends both Commercial and Personal Lines. Coupling that with his finance and life insurance licenses, Kyle serves as full service insurance agent for all of his valued clients. The goal for Kyle is to provide tailored risk management to address his client’s current and future exposures, and to optimize wealth preservation.