Homeowners or Hazard Insurance is required by the lender to protect the property against damage due to fire, wind, vandalism, and a variety of accidents. It also insures against liability claims by others and the theft or damage of contents. The typical cost is about 0.4% of the value of the property for an annual premium. Premiums are usually paid as a part of the monthly payment.
Title Insurance is required by the lender, but is frequently recommended even to buyers paying cash for a property. This coverage defends your title to the property in the event of a defect or dispute that could arise. Defects or disputes could involve forged documents, missing heirs, unreleased liens, and other questions of ownership. Lenders require that you pay the premium necessary to insure the mortgage balance, but do not require that you insure your equity. The premium is a one-time charge at closing.
Mortgage Insurance, PMI, and MIP all refer to coverage required by the lender to insure against loan default by the borrower. The premium is paid by the borrower and provides coverage only for the lender. Requirements and cost vary based on the type of loan (FHA, VA, Conventional, etc.), and should be considered when selecting a loan program. Some premiums are paid monthly and some are paid at closing or financed in the loan amount. Some premiums can be discontinued two years into the loan. Some premiums have refund provisions. Mortgage insurance is not required if your down payment is at least 20% of the purchase price of the property.
Mortgage Life Insurance
pays off your mortgage balance in the event
of the death of a mortgagee. This coverage is a variation of life insurance
that is tied to your mortgage and is not a requirement of the lender.
Other types include accidental death and disability coverage. The purchase
of a home is a good time to evaluate your life insurance. An insurance
agent can help you determine the type of coverage that you need.