How much should home owner's insurance cost in a mortgage?

by Elsewhere 22 Replies latest jw friends

  • TresHappy


    go to or - both of these radio guys have great consumer websites!

  • Elsewhere

    I talked to some people at work and they all are paying about $90 - $100 a month... which is what I was expecting.

    I'm going to have to call back Met to see what is going on. I'm wondering if he misheard me about some detail about the house or if he gave me a quote for some sort of "prime" policy.

    Thanks for all the help!

  • blondie

    American Family combines our house insurance with car insurance on 2 vehicles, and a especially good status. Maybe it is more expensive by state. (I see that AF does not handle Texas.)

  • Double Edge
    Double Edge

    I have both Auto and Homeowners with one company (thereby getting a discount on both policies). On homeowners, I pay around $800 a year..... homes replacement value is around $240k....

    Check online and get some quotes.

  • WildHorses

    Elsewhere, check and see if you can get coverage in your state with 'Erie Insurance'. They have really good rates.

  • liquidsky

    yours sounds about right. a little high actually It all depends, my home owners insuance on a 300,000.00 house is a little over $900 a year, thats with earthquake insuance.

    Maybe your getting mortgage insurance confused with homeowners.

  • CoonDawg

    Ours is less than $700/ year..but we aren't in any kind of "risk" area. For more help on shopping for homeowner's and some of the tricks to look for, you should visit this site they are the sponsors of "Personal Finance Minute" on XM Satellite radio...where I've learned lots of little tidbits.


  • barry

    We have insurance here in Australia for house and contents house value of $300,000 and the annual price is about $300. I think I would get another quote Elswhere.

  • Xandria


    For a while, I worked with Wells Fargo in the Mortgage Department dealing with billing and collections on over due mortages. One of the things, we kept running into was a hike, in the bill. The mortgage company provided the homeowners insurance many times, they do not look for the best coverage at the lowest price. They tend to go very high, I believe it is a deal with the insurance company.

    Also for any reason, Wells Fargo recieved word that an homeowner, who had a loan with them did not have insurance or coverage was interupted. W/F would automatically place the coverage on and they the homeowner would be billed for coverage. Prices for this would vary due to the prices of the home. Insurance ranged from 500 to 5000.00 on top of the mortgage payment.

    People would call in flipping out, because thier payments went up and why because they had a fixed mortage rate.. blah blah blah. We had to explain to them that the insurance companies informed the lenders of the lack of coverage. An it is W/F's policy to protect thier investiment and they do not check for price, they just go for coverage. Once you place coverage with a company of your own choice and the policy of the insurance is recorded. Then the policy W/F placed will come off. But, until the customer placed that coverage, themselves~ they must pay amount added to their mortgage. Needless to say, they had coverage the very next week.

    There isn't alot your mortage company will tell you. There are things a homeowner can do to protect him or herself when it comes to financial matters. Disablity insurance is a good thing to have too, just in case you have a short term or long term injury. The insurance is there to cover your mortage, etc. It is good to have this so you don't have the rug pulled from under you and you get back on your feet faster.

    TIP: You may get pitched on mortgage life insurance, which just pays off the lender in the event of your death. This is not always advisable, especially if the interest rate on the loan is low and you have survivors who may need the mortgage for tax reasons. Instead, increase your regular life insurance coverage so your survivors can invest any proceeds after your death to provide enough money to continue paying the loan and/or pay it off completely. W/F had an option for life insurance coverage, to pay off the home loan completely leaving the home paid in full for the whom ever recieved the home.

    Ask about discounts. You may get reduced rates on new homes or homes with a security system, deadbolt locks or smoke alarms. Try your car insurance carrier. You may get a discount for having both policies with them.

    Cut Your Insurance Costs

    • Insure the home, not the land
      The purchase price of a home includes both. For example, if a $120,000 house sits on a parcel worth $20,000, you should pay insurance on the value of the house, or $100,000.
    • Shop for the best deal
      Check with at least three insurers. Ask friends or colleagues for recommendations.
    • Increase your deductible
      Instead of paying the insurance company, start putting aside funds to pay for minor damage or the deductible in cases of major claims.

    Most buyers get a comprehensive homeowner's insurance policy, which provides coverage for fire damage, water damage (not by flooding, which is covered by federal flood insurance), personal possessions, personal liability, vandalism, theft, and loss of use of the house. If you are financing your home purchase, your lender will require you to buy at least basic hazard insurance.

    Basic Coverage

    The most comprehensive insurance policy is guaranteed replacement cost coverage, which will pay to rebuild your home even if the cost to rebuild exceeds your policy limit. This kind of coverage costs from about $400 to $1,000 a year or much more, depending on the area and the price of the home. Even if you can afford it, it's not available everywhere or for every property--older homes, for example, may not be eligible. Some big insurance companies have started to limit the amount they'll pay to 120 percent of the policy's face value.

    Straight replacement cost coverage, or cash value coverage, is a cheaper and more limited option--about 25 percent less per year than guaranteed replacement coverage. It will pay to rebuild your house if it's destroyed, but coverage is limited to the policy amount. Make certain you're insured for enough to rebuild.

    Special Coverage

    In addition to regular homeowner's insurance, you may require special coverage for hazards such as earthquakes or floods. California is targeted for earthquake coverage, but at least 16 other states are considered at risk for quakes: Arkansas, Colorado, Idaho, Illinois, Indiana, Kentucky, Massachusetts, Mississippi, Missouri, Nevada, New York, South Carolina, Tennessee, Utah, Washington and Wyoming. Earthquake coverage can be costly ($2 to $15 per every $1,000 of coverage), but you should consider it if you live near a fault, your home is more than 50 years old and/or built on a slope, landfill or flood plain.

    If you live in flood-prone areas, you may need flood insurance too, because water damage from dams and waterways is not included in standard homeowner's policies. Flood insurance is available through the federal National Flood Insurance Program, and an average policy runs about $300 a year.

    Applying for Insurance

    Insurance representatives need certain information about you and the property before they can tell you if they'll write a policy and how much it will cost. You'll need to provide:

    Your Social Security number

    The age and location of the home that you want to buy

    The proximity of fire stations to the home

    The age and condition of plumbing and electrical systems

    The insurance company will also want to make sure that you're a good risk. If you previously filed claims, or you frequently pay bills late, you may be denied coverage.

    Shopping Around

    Start shopping for insurance as soon as you sign the purchase contract so you're not stuck if the insurance carrier you choose refuses to insure your home. Some insurance carriers, for example, won't insure homes that are built on slopes or have shake roofs or antiquated electrical systems. I cannot stress enough, that asking questions and getting 2nd and even 3rd opinions may save you money and heart ache in the long run.

    More Tips:

    Many experts recommend paying down principal whenever you can because you end up paying less interest. But you also lose part of your mortgage interest tax break. So to calculate your true savings, you need to factor the difference between your loan's interest rate and the rate at which you take your deduction.

    You may find that you are better off investing any extra funds you have somewhere else. For example, if you can expect to earn 10 percent per year on your investments and you are paying 7 percent on your mortgage, instead of paying down your loan, you might apply extra cash to additional investments and earn a positive spread of 3 percent.

    On the other hand, if you want to increase your equity in the house because you may need to tap it down the road (for a child's college tuition, for example), then prepaying principal will improve the conditions for doing so. Also, if you're currently paying for private mortgage insurance, prepaying principal will help you get more quickly to the point (20 percent equity) at which you can drop it. Whatever the case, keep your options open by looking for a loan that doesn't penalize you for paying ahead.

    Five Lending Terms You Should Know

    • APR
      Annual percentage rate (APR) is the cost of the loan plus note rate and fees, expressed as a yearly rate. May be a half-percentage point higher than the loan rate.
    • Closing costs
      When they complete a real estate transaction, buyers pay the lender's fees and costs for home inspection, recording the deed, title insurance, attorney's services and state or local taxes. Sellers pay different closing costs.
    • Commitment
      A written statement from a lender that specifies the amount it's willing to loan you, at what rate and for how long.
    • PMI
      Private mortgage insurance (PMI) is required on all loans greater than 80 percent. You don't need it after you have 20 percent equity in your house.
    • Points
      Points are loan origination fees. Each point totals 1 percent of the loan amount. Points increase closing costs, but can reduce the interest rate.

    Hope that helps some.


  • Margie

    WHOA! That premium sounds awfully steep! I bought a house (my first!) about 6 months ago and my premium was around $650. The replacement value on the house is $240,000 and our deductible is $1000 (I think). When I was shopping around for homeowner's insurance, I got a wide variation in quotes from different insurance companies. A word of warning: my mortgagor required that I get insurance from a company with a Best rating above a certain level (which I don't remember).

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