Mortgage General

Insuring Your Peace of Mind: The Importance of Having the Right Insurance Coverage

By April 19, 2023 May 31st, 2023 No Comments

Owning a home is among the major purchases a person can make in their lifetime.

At Pegasus Mortgage Lending Inc., we firmly believe that this investment is a crucial component of securing the financial future of you and your family. As such, it is imperative to ensure that this investment is protected. In the event of an unforeseen circumstance, leaving your family solely responsible for making mortgage payments, what would be their course of action?

To guarantee you have proper protection, it’s absolutely crucial to understand that not all insurance products are created equal. Many homeowners and potential homeowners make the mistake of assuming they have adequate coverage simply because they have insurance, but this is not always the case. It’s vital to educate yourself on all of the different insurance products available to guarantee that you have the proper coverage. Don’t take chances with your home and property – be assertive and take control of your insurance decisions.

Four primary insurance product options you will come across

In order to provide you with a comprehensive understanding of insurance, I have outlined the four primary insurance product options you will come across, along with their respective meanings.

  1. Default insurance: When buying a home, it’s essential to understand the role of default insurance. This type of insurance is mandatory for homes where the buyer puts less than 20% down, and it’s what allows lenders to accept lower down payments. With a minimum down payment of just 5%, buyers can access interest rates that are comparable to those offered with larger down payments. Remember that the default insurance premium is based on the loan-to-value ratio and can either be paid in a single lump sum or integrated into your mortgage and added to your monthly payments. It’s a must-have for anyone planning on purchasing a home with less than a 20% down payment.
  2. Home (Property & Fire) Insurance: When it comes to buying a home, property and fire coverage, commonly known as home insurance, is a mandatory insurance option that must be in place before closing the mortgage. Yet, it is vital to keep in mind that not all homes or properties are insurable, and it is critical to evaluate this rapidly as possible.  In addition to protecting against fire damage, home insurance can also cover the contents of your home, depending on the policy. This is especially important for those purchasing condos or townhouses, as strata insurance typically only covers the building itself and common areas, but not personal belongings or upgrades made to the unit. Therefore, it’s essential to cross-check your strata insurance policy and take out an individual one on your unit to cover any gaps in coverage. Finally, it’s worth noting that natural disasters like floods or earthquakes may not be covered by standard home insurance policies. Hence, depending on your location, you may need to purchase additional coverage to be adequately protected.
  3. Title Insurance: It is another type of insurance policy that potential homeowners may need to consider. Lenders require borrowers to purchase title insurance to protect their interests. Homeowners, on the other hand, can purchase this insurance for themselves. The primary benefit of title insurance is that it can protect against existing liens on the property’s title and title fraud. Title fraud can occur when someone uses stolen personal information or forged documents to transfer the title of your property to themselves without your knowledge. Title insurance, like default insurance, is a one-time fee or payment that is dependent on the appraised value of your property.
  4. Mortgage Creditor Life Insurance Programs: The mortgage protection plan coverage is an optional insurance policy that any agent would recommend as extremely important. Its purpose is to safeguard you and your family should something unexpected occur. It serves as a disability and life insurance policy specifically for your mortgage. Generally, mortgage approval is based on family income. If one of the partners in the mortgage is unable to contribute due to disability or death, a mortgage protection plan provides security for your mortgage payments.

Important Considerations When Choosing Insurance

When choosing an insurance policy, there are several factors to consider. When you look ahead, consider what you want to establish and how you’re going to safeguard it so that your loved ones will have stability, safety, and peace of mind if there are any uncertainties. The important points of consideration are as follows:

  • Research different providers and policies to find the right policy for your needs.
  • Read the fine print carefully to ensure the policy covers all your bases.
  • Consider the policy’s cost and ensure it fits within your budget.
  • Look for a policy with flexible terms that can be tailored to your specific situation.
  • Consider the reputation of the insurance provider and their customer service track record.
  • Make sure you understand the coverage limits and any exclusions that may apply.
  • Think about how the policy will fit into your overall financial plan and whether it will provide the protection you need.

Make sure that you cover all the above pointers before signing on the dotted line!

The Bottom Line

If you have any queries regarding mortgage insurance or the best available mortgage options, feel free to seek the assistance of a Pegasus Mortgage Lending expert for professional guidance! They can examine your existing plan, discuss your requirements, and suggest suitable coverage that fits your specific needs.

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