Robert Darrow, Broker Associate
“As massive floods from Tropical Storm Harvey sweep Texas, you might be wondering how fast you can buy flood insurance. Home insurance doesn’t pay to repair damage caused by flooding. You’ll need to buy separate flood insurance to cover tropical storms, torrential rain and overflowing rivers.”
Lynne McChristian, spokesperson for the Insurance Information Institute, an industry organization, said that Florida homeowner insurance rates shouldn’t be affected for one simple reason: rates are set at the state level and are based on what happens within the state. “What happens in Florida stays in Florida, what happens in Texas stays in Texas and that is the way it works in every state,” she said.
I love it when a blog post writes itself. This was a conversation I had with clients who were seeking insurance on their new home in anticipation of closing in a few weeks.
Hey Bob, you can get back to me tomorrow, no rush whatsoever. I just realized the quote you sent me is 2000 higher than what my mortgage broker factored in. So that will make my mortgage about $170 more per month and I don’t want that obviously. Do I have any options and if I do what do you think is best?
Yeah – about that…
Your mortgage broker should have known.
Most mortgage brokers in the country use an estimate of what your home owner insurance will be of around 1% of purchase price. Per year. Divided by 12 of course to get your monthly cost. So I could have forgiven a national mortgage broker for doing it that way.
But your mortgage broker is local. She should have known better but perhaps I’ll give her the benefit of the doubt because her company is a national company and maybe their system for generating Good Faith Estimates won’t let her change the number.
But alas we live in hurricane country. And we picked an old house without any hurricane protection. (Which was sorta given considering our price range.). But yeah – this is what home insurance costs down here. It’s breathtaking.
I’ll send your info to another insurance broker and see if he can come up with a better quote/policy but it won’t be much better – like the best I would wager is like $500 less.
I think we went over this once – but of course we went over a bewildering amount of info along the way. I usually coach my clients to plan for 2% as the cost of insurance rather than the piddly little 1% estimate. Better safe than sorry.
What if i was to pay the amount up front? Could i do that? Like for the whole year?
Oh no – wait for it…..
YOU ARE! Twice!
You’ll be paying for a year of insurance up front at closing. AND you will be paying monthly for it. Because you have to pay a year up front and then escrow enough money to pay it again next year. It will be required by your mortgage company. If you made a HUGE down payment, the lender would let you pay your own. But on a nearly-nothing down mortgage the lender wants to be absolutely positive that the bill gets paid every year. So they escrow for it. Taxes too.
Christ on the cross….ok, got it.