INSURANCE


3 Types of Home-Related Insurance to Consider

A standard homeowners policy may not cover everything you need. Here are three types of policies that might come in handy:

Title insurance. When you buy a house, the mortgage lender will require you to purchase insurance on the title. This protects the lender's lien on the property against a defect in the title, or a lien or some other encumbrance. If you want to protect yourself as well, you'll have to purchase an owner's title-insurance policy.

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There is an important difference between the lender's policy and yours. The lender is protected to the extent of the mortgage, which declines as time goes by. You want protection for the price of the house, which includes your down payment. If you suffer a loss, then your title-insurance company is on the hook, not you. Most title-insurance policies follow the same general format. You are protected against loss or damage from forgery, misrepresentations of identity, age, or other matters that could affect the legality of the ownership documents and liens recorded in the public record that may come to light after the deal is closed.

Some title-insurance companies offer special reissue rates on policies for homes changing owners. If you're buying, find out whether the current owner has title insurance and whether the company offers a reissue rate.

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Flood insurance. The federal government is the main underwriter of flood insurance, but most homeowners insurance agents can sell you a federal policy. The average cost is about $360 per year for $100,000 of coverage, with a ceiling of $250,000 on the structure and $100,000 on the contents, if you are in a zone with low to moderate risk of flooding. You can get details from the National Flood Insurance Program.

Umbrella liability insurance. Homeowners and auto insurance can provide pretty good protection, but in light of the million-dollar settlements in personal-liability cases, a policy that stops at $300,000 or $500,000 may strike you as inadequate. Suppose someone sued you for a million?

An umbrella picks up where your existing coverage leaves off and protects you to whatever limit you choose -- typically $1 million. A typical umbrella policy covers accidents involving your home, motor vehicles, boat and other property, as well as the cost of defending yourself against charges of slander and libel (provided, in the last two cases, that you're not a professional writer and thus considered more at risk of being sued for libel).

For $1 million worth of coverage you can expect to pay $350 per year, more if you're insuring more than one house, car, or driver, or if you own a recreational vehicle. Check with a few of the leading property insurers because rates and conditions differ significantly; some umbrellas are bigger than others. Make sure you know what's excluded, particularly for business or professional liability. Finally, take into account not only the cost of the premiums but also any extra premiums needed to raise your underlying insurance to the umbrella policy's required limits.

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