i have a bank of america loan of 72,000 wondering how much should i be paying for insurance coverage. i pay both insurances separate 400 a year for homeowners coverage amount of 190,000 with my chosen insurance and bank of america is asking for coverage amount of 180,000 (1,900 a year)in flood insurance they placed. legally shouldn?t i pay less than what my mortgage is worth. bank an gent said i have to talk to homeowners insurance to lower my coverage in order to lower there purchasing flood insurance.they said they re goingby the homeowners insurance i have. So i will be visitingthe agent insurance soon to make changes , so how much coverage should i be purchasing and exactly be paying yearly.
The loan balance has absolutely NO connection to how much you "should be paying" for house and flood insurance.
Your house insurance and flood insurance are BOTH based on the "cost to rebuild" your house ? not the loan balance, not the market value.If you have a kitchen fire, would you be happy if the insurance paid you 1/6th the policy limit, if you insured your house for $72,000?Probably not ? you?d PROBABLY want them to FIX YOUR KITCHEN.
What you have to do, is get a written estimate from a general contractor, of how much they?d charge you, detailed, to REBUILD YOUR HOME.And THAT is the amount of insurance you have to cover, while you have a loan.
AFTER you pay your house off, you can flat out cancel your insurance if you want.Or, you can pay a much, much higher rate, to get a low value policy.
Most people who want to lower their coverage limit, don?t actually want LESS coverage ? they want LOWER INSURANCE costs, but they want that kitchen fire to STILL be fully covered!Go figure.
Remember that your home insurance is the amount it would cost to replace your home and entire contents of your house. That is why your insurance coverage amount is different than your loan amount and even your tax value.So the real question is, will 180k cover getting your house rebuilt?
Your amount of insurance depends on the replacement value not the sale value. You should have the insurance company evaluate the coverage need based on their models. However- if you do not trust it, get multiple opinions.
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