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What Is A Homeowner's Insurance Binder?

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.

if you are interested in buying Canton MA Real Estate, contact your Canton MA Buyer Agent to answer all your questions.

 
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Comment balloon 6 commentsChristine Smith • February 09 2011 10:22PM

Comments

Great explanation, Christine! I'm sure your buyers appreciate the explanation of terms which are often completing puzzling to first-time home buyers, and even others who never understood the jargon.

Posted by Nina Rogoff, Sells Real Estate! (RE/MAX Executive Realty) almost 9 years ago

It's amazing how much we know and the average person that has no clue about the lingo is just lost... but then again... if they talked to me about their profession, I would probably just as lost. We need to explain things in real terms that everyone can understand.. I didn't even know what this was! Thanks for the clear explaination! :)

Posted by Tammy Emineth, Content Marketer, SEO Teacher, Website Fixer (Personal SEO - Website SEO and Real Estate Marketing) almost 9 years ago

that's a great post, Christine!  Explained very well!

Best~

Karen 

Posted by Karen Burket, Valley Mortgage Grou, Conventional, FHA, VA, mortgages (Bank of Oregon a division of Willamette Valley Bank ) almost 9 years ago

Christine - Thank you for sharing very good information on homeowner's insurance binder.

Posted by John Pusa, Your All Time Realtor With Exceptional Service (Berkshire Hathaway Home Services Crest) almost 9 years ago

It's funny....this was not a post I expected comments on!  You never know!

Nina....thanks.  Sometimes I forget too but I always tell them to interrupt me & ask questions about anything I say that they don't understand.

Tammy...it may also be more of a regional term too. Practices vary so much from state to state.

Karen...thanks for stopping by & for the comment.

John....you are welcome.

Valerie....yes, prior to approval to close most lenders around here at least require proof of insurance & that it has been paid in full for the upcoming year.  As soon as that deed is recorded, it is the new owner's responsibility should anything happen to the property.  So, yes, lenders want to make sure that the property they just loaned money on is insured.

Posted by Christine Smith, Exclusive Buyer Agent & Attorney, Canton, MA (Buyers Brokers Only LLC - www.BuyersBrokersOnly.com) almost 9 years ago

A pretty good explanation.   Thanks for posting.


The insurance world is super complex and binders are just one of many documents that insurance agents have to churn out on a weekly basis.

 

I would just add that usually (and it can depend on the area that you are in) the binder can be paid for by monies in the escrow account. So in theory the insurance agent will issue the binder, technically without it being paid for.  However since it is pulled from the escrow account, usually banks are OK with this.

 

Thanks

Scott

Whole Vs Term

Posted by Scott W. Johnson, Insurance Broker-Agent (Marindependent Insurance Services LLC) about 2 years ago

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