What Is A Homeowner's Insurance Binder?
This is a question I received from one of my clients. Sometimes we get used to the terms and forget that a new buyer may not speak the same language. In preparing my clients for the upcoming closing, I was going over the requirements that they would need to meet. I reminded them that they would need a homeowner's insurance binder.
Here is the question I was emailed:
So I have a question, what is a homeowner's insurance binder?
And, here is my answer:
The mortgage company requires that you obtain homeowner's insurance on the home you are purchasing. They will require you to pay for the first year's premium up front prior to closing and bring a "binder" showing that you have insurance. The binder is basically a certificate that your insurance agent will issue that shows you have insurance & what your coverage is & most importantly will list the mortgage company as a "loss payee" - that is, if there were a fire or other incident & the home was lost, the mortgage company would be covered. If you call your insurance agent & tell them you need a binder for a closing, they will know exactly what you mean.
The mortgage company has requirements as to how much coverage you must have & how the loss payee clause should read. You will at least want it insured for the purchase price & most mortgage companies will require replacement cost coverage.
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Christine Smith is an Attorney and Exclusive Buyer Agent with over 25 years of experience in the real estate field.
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