3 Things You Should Know About Preliminary Title Reports

This helpful document contains a wealth of information.

Among the dozens of records that serve to inform or disclose to the buyer significant knowledge about the property, the title report is one of the most important. It documents ownership, vesting, and detail regarding anything recorded against the home, such as liens, encroachments, or easements.

The title company compiles the report from a search of county records to issue title insurance, and any liens against the property are listed as “exceptions” to a title policy.

Here are three important pieces of the title report you should review carefully.

The legal description

The legal description is everything you won’t see in any real estate agent marketing or advertising. It’s the written description of the property’s location and the boundaries of the property in relation to the nearby streets and intersections.

In the case of a condominium or planned unit development (PUD), the legal description will include the property’s interest in any common areas, exclusive or non-exclusive easements, and details on any parking or storage that conveys with the property.

Here’s an example of a legal description from a preliminary title report of a property:

“Beginning at a point on the Westerly line of Fifth Avenue, distant thereon 250 feet Southerly from the Southerly line of Balboa Street; running thence Southerly along the Westerly line of Fifth Avenue 25 feet; thence at a right angle Westerly 120 feet,” and so on.

Legalese? Absolutely. But it’s precise, and necessary.


Property taxes always show up as the primary “lien” on a title report. A property cannot be transferred to a new owner with outstanding property taxes due.

As the top lien, the report will indicate whether taxes are due or paid in full. Taxes must be settled before any debt holder gets paid.

Mortgage liens

Mortgage liens are generally listed directly below property taxes, and they’re always ordered first, second, and third. The largest lien holder generally takes first position.

When a sale closes, the liens must be paid in the order that they appear on the title report. In the case of a short sale, there are not enough proceeds from the sale to pay off the property taxes and all of the lien holders. So one or more lenders will get “shorted” by the amount they’re owed. In order for the sale to close, the lender must agree to the short payoff.

Though this list is in no way exclusive, there are a variety of other items that could show up on a title report outside of taxes and loans.

Easements. If another property owner has access to the property via an easement, it would be recorded on the title report. This stays on the report until both parties agree to remove it. The title company can pull the original easement agreement for review.

CC&Rs. In the case of a condo or PUD, there are Covenants, Conditions and Restrictions (CC&Rs), recorded against the property. Any new buyer purchases subject to the rules and regulations documented in the CC&Rs. This is why it’s important for potential buyers to pull these from the report and review them. Once you’re the owner, you’re subject to those rules.

Restrictions, historic oversights, planning requirements. From time to time, there will be items on the preliminary title report that aren’t run of the mill. If the home is located in a historic district and therefore subject to the rules and restrictions of that community, it will show up on the title. In this case, if there are restrictions about changing the facade of a house or requirements that facade alterations comply with a local historical oversight committee led by the local planning department, a potential buyer needs to know this.

The last word

As a potential buyer, you and your agent or real estate attorney should scrutinize the preliminary title report. You want the title to be delivered as clean as possible.

If the property is subject to special items, or there are issues on the title that would affect your homeownership, you need to know and understand them thoroughly before you close.

Check out our Home Buyers Guide for more home shopping tips and tools.


Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Originally published March 22, 2012

Source: zillow.com

Can you sell your house after refinancing?

Are you considering a refi before you sell?

There are a number of reasons you might want to refinance your home before selling it.

Maybe you want to cash out home equity for repairs. Maybe you’ve already moved and you’re paying two loans. Or maybe you’re just looking for a lower interest rate and monthly payment.

Understand most lenders won’t let you refinance if the home is already listed for sale.

But if it’s not listed, there’s no rule that says you can’t sell your house after refinancing.

However, you might run into a few roadblocks. Here’s what you should know. 

Verify your refinance eligibility (Feb 15th, 2021)

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How soon can you sell your house after refinancing?

Many mortgage lenders don’t dictate how often you can refinance your mortgage. But they might impose restrictions on how soon you can sell after refinancing.

Owner-occupancy clauses

Depending on the language in your refinance agreement, you may have an owner-occupancy stipulation that stops you from selling (or renting out the house) within the first 6-12 months after refinancing. 

By signing the refinancing paperwork, you affirm that you “intend to occupy the home as your primary residence for a period of usually one year.” 

If your agreement doesn’t include this stipulation, you can sell at any time after refinancing.

But if your agreement does include this clause, selling too soon could trigger legal issues with your lender. 

The good news is that this isn’t a hard and fast rule. Some lenders will not enforce this clause if you have extenuating circumstances or a valid reason for selling within this window.

If you plan to sell after refinancing, make sure to look for owner-occupancy clauses in the refi agreement and ask your lender what it considers an acceptable reason to sell before the waiting period is up.

Prepayment penalties

Even if you don’t have an owner-occupancy clause in your refinance agreement, your agreement might have a prepayment penalty.

This is a fee that some lenders charge when a borrower pays off their mortgage loan early, usually within the first three years of getting the loan.

Most new mortgage loans do not have prepayment penalties. But make sure you review your mortgage paperwork to confirm this before selling your home. 

In cases where one does apply, there are two types of prepayment penalties: a hard penalty and a soft penalty. 

A hard penalty restricts both selling and refinancing within the first three years, whereas a soft penalty only applies to refinancing. 

If you have a hard penalty and sell within the penalty-period, you’ll pay either a percent of the remaining loan balance or a certain number of month’s worth of interest.

This is need-to-know information because prepayment penalties are costly.

Let’s say you have a 2% prepayment penalty and a remaining loan balance of $200,000. In this example, you would pay your lender $4,000.

Again, prepayment penalties are rare; but on the off chance your loan has one, you’ll want to be aware of it before selling.

Verify your refinance eligibility (Feb 15th, 2021)

Can you refinance while your home is listed for sale?

There are several seemingly good reasons to refinance while your home is listed for sale.

Maybe your adjustable-rate mortgage is about to reset, and you want to lock in a fixed-rate mortgage in case the property doesn’t sell. Or maybe you already moved, and you’re currently paying two mortgages.

Even if you have a valid reason for refinancing after listing your home, understand that many lenders will not refinance under these circumstances. 

If you want to refinance while the home is listed, you may have to remove the listing and keep it off the market 3-6 months.

From a lender’s perspective, you don’t intend on living in the home long-term, so approving the refinance is too risky.

You might find another home before renting or selling this one and let the old mortgage default.

Lenders have to protect themselves. They may have to cover the cost of foreclosure if they refinance real estate that’s listed for sale, then the mortgage defaults after selling it on the secondary market.

So in most cases, no, you cannot refinance your home while it’s listed for sale. The lender will require that you remove the listing, and you might have to keep it off the market for at least three to six months.

However, there are likely some non-traditional lenders, hard money lenders, and others who may consider a property that was just removed from a sale listing.

Is it a good idea to refinance right before you sell?

Even if you’re given the green light to refinance right before selling, should you?

First, let’s dive into a few reasons why someone might consider refinancing before selling their current home.

Reasons you might want to refinance before selling

As earlier mentioned, if mortgage rates are on the upswing, you might refinance to quickly convert an adjustable-rate mortgage to a fixed-rate mortgage and avoid a possibly higher rate down the road.

Some homeowners might want to refinance for a better interest rate and monthly mortgage payment to save money while preparing to sell.

Or, maybe you want to pull a little cash from your equity with a cash-out refinance. If you have enough equity, you could use the money to make improvements to the property before listing.

This could potentially increase the home’s value and help you get a better offer from home buyers when you do sell.

Drawbacks to refinancing before you sell your home

Although you might have good reasons for refinancing before selling, it doesn’t always make financial sense.

Remember, refinancing isn’t free. There are closing costs to consider, which range from 2% to 5% of the loan balance — the same as when you bought the home.

Selling a house after refinancing means you’re less likely to recoup what you spend at closing.

For example, if you pay $5,000 in closing costs, and refinancing reduces your mortgage payment by $250, you’ll need to live in the home for at least another 20 months to break even.

In addition, if you plan to move, refinancing could make qualifying for a mortgage on your new home a little more difficult.

For instance, paying closing costs could reduce savings for a down payment on your new loan. And applying for a refinance could take a couple of points off your credit score, which might have a bigger impact on your future interest rate than you’d think.

If you plan to move, it generally makes more sense not to refinance, and to put your cash towards the down payment and closing costs on your next property instead.

Is a no-closing cost refinance a good idea?

You might ask: Couldn’t I just get a no-closing cost refinance?

This is a good question, but it’s important to understand how a no-closing cost mortgage works. 

The benefit of this strategy is that you avoid paying closing costs out of pocket. The downside is that a no-closing cost refinance typically involves paying a higher mortgage rate to compensate for the lender absorbing these fees. 

Or, the lender might simply roll the closing costs into your new mortgage, thus increasing your total mortgage balance.

So although a no-closing cost refinance lets you keep money in the bank, you’ll pay the price in other ways. 

Still, it could be a good idea — but only when a higher rate still results in monthly savings, or when rolling closing costs into the balance doesn’t cut too much into your home equity. 

And if you think you’ll sell in the near future, make sure you understand the refinance agreement before moving forward 

Look for an owner-occupancy clause, prepayment penalties, and count the upfront cost to determine whether refinancing makes financial sense.

You should only refinance if you’ll see a real financial benefit — not just a lower interest rate.

What are today’s refinance rates?

Today’s refinance rates are at historic lows. Many homeowners stand to save by refinancing — but if you plan to sell in the near future, a refi isn’t always the best move.

If you’re on the fence, talk to a loan officer or mortgage broker who can help you explore your options.

Before signing on, you should fully understand and how a refinance will affect your personal finances as well as your homeownership plans in the short- and long-term.

Verify your new rate (Feb 15th, 2021)

Source: themortgagereports.com

Is a Dual Agency Relationship Risky?

Can one agent represent both parties? The answer: It depends.

Buyers and sellers sometimes have the option of entering into a dual agency relationship with their real estate agent. Although this is not necessarily a problem, you should be aware of exactly what a dual real estate agency means and the restrictions it can place on your agent.

What is a dual real estate agency?

The term “agency” refers to the relationship that you, as a buyer or seller, have with your real estate agent. Dual agencies can occur with two agents or with a single agent.

A dual agency with two agents can occur when the buyer’s agent and the seller’s agent are licensed under the same broker.

In a dual agency with a single agent, potential buyers may ask a seller’s real estate agent to submit an offer on their behalf. In this case, the agent is acting as a dual agent.

Dual real estate agency disclosure

Because dual agencies represent a conflict of interest for the buyer and seller, some states don’t allow them.

In states where dual agencies are legal, however, the law requires that a dual real estate agent inform both the buyer and seller of a dual real estate agency. These two parties must also sign consent forms indicating that they understand the concept of dual agency, as well as the restrictions imposed on the real estate agent by this type of agreement.

If either the buyer or the seller refuses to sign the dual agency agreement, the transaction cannot continue. Once the dual agency agreement is executed, the real estate agent becomes known as the disclosed dual agent.

Disadvantages of dual agencies

Dual agency imposes some restrictions on a real estate agent. The agent is required to treat both buyer and seller with fairness and honesty.

The agent is required to provide full disclosure concerning the property to the buyer, but they cannot reveal confidential information about the seller. When the time comes to make an offer, a dual real estate agent cannot advise the buyer on how much to offer, nor can they advise the seller to accept or reject an offer.

In a New York Department of State memo, consumers are advised to be wary of dual agency relationships. The memo states that when a person enters into a dual agency relationship, they are forfeiting their right to that agent’s loyalty. The agent then cannot advance the interests of either party.


Source: zillow.com

What Is a Force Majeure Clause, and What Does It Mean for Mortgages?

In French, it means superior force. However, in legalese, the term force majeure refers to a clause that can allow a person or business to extricate themselves from a contract.

“In general, it’s a force outside the control of a party,” says Denver, CO, contracts attorney Susan Goodman. “What the force majeure clause says is: If there’s an act of force majeure, then performance is excused if the performance is affected by that act.”

In even plainer English, it means: If something completely unpredictable occurs, a contract may be voided.

The current pandemic certainly seems to fit the bill, and will have contract holders invoking force majeure for relief from creditors.

However, mortgage holders looking for a way out of their debt obligations are likely to be out of luck when it comes to following the path of force majeure. Here’s how force majeure works in a contract.

What is an act of force majeure?

Contracts with a force majeure clause often list (very) specific potential calamities. If any of those calamities come to pass, a contracted party is allowed to back out of the deal with no penalty.

Force majeure events often written into contracts include:

  • “Acts of God,” which often include severe weather, floods, earthquakes, hurricanes, fires, etc.
  • Acts of war
  • Acts of terrorism
  • Acts of government authorities
  • Strikes or labor disputes
  • An inability to secure materials
  • Other causes beyond the reasonable control of a party

Do all contracts have force majeure clauses?

Force majeure clauses are almost always written into business-to-business contracts.

However, personal mortgages usually do not contain force majeure clauses. Neither do apartment leases or contracts for home improvements.

Commercial leases and development projects often do, and those clauses may be invoked due to COVID-19.

“You’re seeing a lot of activity on the on the [commercial] leasing front now with the argument of force majeure,” says Jack Fersko, co-chair of the real estate department at the law firm Greenbaum, Rowe, Smith, & Davis LLP in New Jersey and co-chair of the American Bar Association’s real estate section committee.

Businesses “can’t use the space—whether it is because of the virus, which has closed operations down, or [because of local] government orders.”

Construction firms might also invoke the clause if they’re unable to meet deadlines or milestones on a development project. Adding to the confusion is that each state has different requirements for force majeure clauses, which means there’s no one-size-fits-all option.

Invoking a force majeure clause

By definition, an act of force majeure must prevent one or both parties from performing a service listed in the contract.

But economic hardship is not a reason to invoke force majeure.

“Anybody can always claim economic hardship. If your company goes into bankruptcy, that doesn’t void a contract, and you can’t get out of it by force majeure,” says Goodman.

As always, the key for consumers is: Be aware of all terms in any contract.

Courts around the country are already investigating COVID-19 and how it might relate to force majeure.

“I think it’s important to point out that this is such a unique situation. We’re already hearing that courts are treating things differently than one might expect—like not calling this an act of God,” Goodman says.

Fersko adds that there isn’t much legal precedent for the current crisis.

“I guess we’ll look to fall back to the early 1900s with the flu. We’ll look to other events in history that may be akin to this, and see what sort of case law evolved from that,” he says.

“In many respects, this being a worldwide pandemic, it’s certainly going to create some novel legal issues.”

Future contracts are likely to include allowance for pandemics

“Force majeure clauses are all written differently,” Goodman explains. She adds that she has seen some clauses with the word “epidemic,” but none with the word “pandemic.”

That will change, of course, after the coronavirus outbreak.

“Most force majeures after 9/11 added terrorism to the clauses. It was never in it before, because nobody really thought of it—because it wasn’t really part of our society,” Goodman says.

“I think pandemics and epidemics are going to be added to every force majeure clause. Attorneys are already advising their clients to do that.”

The key to a force majeure event is its unpredictability. However, if an unfortunate event or disaster was something that you could and should have prepared for, it’s nearly impossible to invoke the clause.

For more smart financial news and advice, head over to MarketWatch.

Source: realtor.com

Tenant Troubles: Who Is Responsible for Problems in Your Rental?

Who foots the bill when the maintenance issues roll in? It depends, so get to know your tenant rights.

One of renting’s major benefits is that you don’t have to worry about upkeep, maintenance and expensive repairs. So when things go bad — your dishwasher stops working, the roof is leaking or the bugs just won’t go away — your first call is usually your landlord.

But how do you know what’s really their responsibility and what falls to you? And what do you do if they refuse to handle the repairs?

Read on for the most common rental issues and how to get them fixed quickly.

Water damage & mold

Easily one of the nastiest discoveries you can find in your home, mold is a common problem — especially in humid or rainy climates. And while most mold doesn’t cause health problems, some types can cause respiratory issues, headaches and allergy symptoms.

Since there’s no easy way for the average tenant to know if the mold in their home is dangerous or not, it’s always best to ask your landlord to get rid of it.

While there’s no federal law that dictates mold exposure limits in rental housing, some states and cities have put guidelines in place. But, even if your state doesn’t have specific mold regulations, your landlord is still responsible for providing safe, livable housing.

In addition to requesting that your landlord remove the mold, make sure they find the source of the mold, whether it’s a leak in the roof or around the windows, failing plumbing, or a basement that’s not watertight. If the underlying water damage isn’t addressed, the mold will likely return.

The one time a landlord may be able to reject your request for mold remediation is if they believe it’s a result of your behavior — if you don’t keep your home well-ventilated, don’t clean regularly or run a humidifier too much.

Broken appliances

Your landlord is responsible for keeping any appliances that came with the unit in good working order. They’re also required to do the preventive maintenance that keeps your appliances up and running, like replacing worn hoses or servicing the air conditioner.

If you brought some of your own appliances, like a microwave or a washer and dryer, you’re typically responsible for repairing and replacing them.

Perhaps the most important appliance your landlord is responsible for is your furnace. Local and state laws require landlords to provide adequate heating, so if you’re having trouble keeping your home warm, reach out to your landlord immediately.

In some warm-weather states, landlords are also required to provide air conditioning. It may not be required in other states, but if your unit has air conditioning, your landlord is required to maintain it.


Remember when we said that landlords are required to provide tenants with a safe, livable space? That includes pest-free living, but there are a few more gray areas with pests than with other maintenance issues.

Whether your landlord is responsible or not depends on a few factors, including the state you live in, the type of rental unit and the type of pest. For example, in some states (but not others), landlords are legally required to manage bedbug infestations, which are an increasingly common issue.

In some states, landlords are responsible for all pest control, unless you’re renting a single-family home and they can prove that the pests are a result of you not keeping your home clean.

No matter where you live and what local and state regulations are, let your landlord know about any kind of pest as soon as possible. A good landlord should want to address these issues quickly to avoid having them spread to different units.

What if my landlord isn’t cooperating?

In a perfect world, your landlord would fix every problem, without issue, in a timely manner. But in the real world, that doesn’t always happen.

Consider these tips for getting landlord repair issues handled quickly and completely:

  • Report even small issues. That tiny leak under your bathroom sink may not seem like a big deal now, but it could cause a serious mold problem down the road. Always let your landlord know about issues as soon as you notice them, before they can get worse.
  • Make repair requests in writing. Don’t make repair requests verbally. Instead, send them via email so you have a paper trail and documentation with a date and time stamp.
  • Always have renters insurance. It’s an affordable way to protect your belongings in case of damage caused by landlord negligence, plus a variety of other issues. It’s typically very affordable and can be purchased online in a matter of minutes.
  • Reread your lease. You (hopefully!) read your lease when you first signed it, but if you’re having issues with your landlord refusing to do repairs, take another look at your lease paperwork and see what they — and you — have already agreed to.
  • Get help from a local tenants’ rights organization. If your landlord isn’t addressing major repair issues, find a local tenants’ rights organization on the U.S. Department of Housing and Urban Development website. They can help you identify local and state laws that apply to your situation and provide resources for additional assistance.


Source: zillow.com

What You Need to Know About the Fair Housing Act

This landmark legislation passed 50 years ago — learn your rights and how to defend them.

If you’ve searched for a new place to live recently, you’ve likely seen the Equal Housing Opportunity logo (an equal sign inside a house) on a landlord’s, real estate agent’s or lender’s paperwork.

But the Fair Housing Act is more than just a logo. It’s a federal law designed to protect renters and buyers from discrimination.

Here are some key points to know about the Fair Housing Act when you’re searching for a place to live.

What is the Fair Housing Act?

Also known as the Civil Rights Act of 1968, the Fair Housing Act was signed into law by President Lyndon B. Johnson just days after the assassination of Martin Luther King Jr., who had championed the cause for many years.

The act prohibits housing discrimination based on race, color, religion, national origin, sex, disability and familial status (sex was added in 1974, and disability and familial status were added in 1988).

At the time the act was signed, overt housing discrimination was a huge problem throughout the country, including the attempted segregation of whole neighborhoods and the outright rejection of qualified renters based on race and other factors.

Today, much of the discrimination in the housing market is less obvious, but it’s still an unfortunate reality.

According to the National Fair Housing Alliance (NFHA), over 25,000 housing discrimination complaints were filed with the federal government and local and national fair housing agencies in 2017. Over half of the complaints were based on disability, followed by race at 20 percent.

But these numbers reflect only reported incidents. The NFHA estimates that over 4 million instances of housing discrimination occur annually, but many people don’t realize they’ve been discriminated against — or know what steps to take when it happens.

What does housing discrimination look like?

Most of the people you encounter in your home search, including real estate agents, sellers, landlords, property management companies and lenders, are bound to Fair Housing Act regulations and additional state and local laws, based on where you live or are looking to live.

Fair Housing Act violations can occur in all phases of buying and renting, including in advertising, while you search, throughout the application process, in financing or credit checks, and during eviction proceedings.

Here are a few examples of discrimination people in protected classes have encountered:

  • A real estate agent tries to “steer” a buyer away from a certain neighborhood
  • A landlord tries to avoid renting to someone by saying the unit advertised has been rented when it hasn’t
  • A property management company refuses to rent to a family with children or requires a higher deposit
  • A landlord evicts a person of color for a reason they wouldn’t evict a white tenant for
  • A mortgage broker asks questions or requests excessive documentation from an immigrant couple that they wouldn’t request from another buyer
  • A lender charges a single woman a higher interest rate than what her credit score should dictate
  • A landlord refuses to make reasonable accommodations for a tenant who is disabled

What do I do if I’ve been discriminated against?

If you’ve been discriminated against in any of the ways above, or if you suspect that other actions taken by a property manager, landlord, real estate agent, broker or lender may be discriminatory, there are many resources at your disposal.

  1. File a report: File a complaint with the Department of Housing and Urban Development (HUD) at HUD.gov. You can also file a complaint with local housing resources found through the NFHA.
  2. Get more info from local housing agencies: You can find a list of local housing counselors at HUD.gov. Besides answering questions about discrimination claims, these agencies provide home buyer education workshops, pre-purchase counseling and rental housing assistance.
  3. Talk to an attorney: Like any other legal issue, when pursuing a complaint under the Fair Housing Act, it’s smart to consult a lawyer.
  4. Find people you can trust: If you experienced housing discrimination from your real estate agent, mortgage broker or lender, it’s time to find a new professional to help you in your home search. Ask friends, family members and colleagues for referrals they know, like and trust. Remember — these real estate professionals are working for you, so their only concern should be finding you the home that’s right for you.


Source: zillow.com

5 Tips Every Renter and Homeowner Should Know About Insurance

There’s alot that renters and homeowners need to know about insurance. Money Girl covers five essential insurance tips about the protections you get from basic renters and home policies, mistakes to avoid when buying a policy, and ways to save money on premiums.


Laura Adams, MBA
September 4, 2019

Renters insurance gives the same protections as a homeowners policy. You get coverage for your personal belongings, liability, and additional living expenses. But it doesn’t cover damage to rental property because that’s your landlord’s responsibility.

Unfortunately, about half of renters don’t have renters insurance. Many mistakenly believe that their landlord would pay to repair or replace their damaged or stolen personal belongings. Or they mistakenly think a renters policy is too expensive. The good news is that a typical renters policy is quite affordable, costing just $185 per year on average across the U.S.

The good news is that a typical renters policy is quite affordable, costing just $185 per year on average across the US.

But what surprises many people is that a standard home or renters policy doesn’t cover some natural disasters. These include earthquakes and flooding from groundwater.

If you live in an earthquake-prone area, you can typically add earthquake coverage to a home or renters policy. But flooding is a different category of insurance that must be purchased separately. Flooding is handled differently than other types of disasters because it’s the nation’s most common and expensive disaster. Floods can happen anywhere, and they don’t even have to be catastrophic to cause significant damage.

If your town or community participates in the National Flood Insurance Program, you can buy a policy for your rental or your home. And if you buy a home in a designated flood zone, mortgage lenders typically require you to have flood insurance.

Most flood policies have a 30-day waiting period, so you can’t wait until a storm is bearing down on you to sign up. You’d be too late.

Even though the federal government backs flood insurance, it’s brokered by regular insurance companies or agents. You can learn more at floodsmart.gov.

Most flood policies have a 30-day waiting period, so you can’t wait until a storm is bearing down on you to sign up.

Remember that water damage from rain, high winds, or a tree that fell on your roof are covered by a standard home or renters insurance policy. But damages to your home or personal belongings that occur due to rising groundwater are never covered, except when you have flood insurance.

Also note that if you have a home-based business with inventory, specialized equipment, or customers who enter your property, you typically need a commercial policy. Likewise, if you turn your home into a rental, Airbnb, or a vacation property, you generally need additional coverage or a landlord insurance policy.

2. Certain belongings have low coverage limits

Just like not every disaster is covered, not every type of personal belonging is fully covered under a home or renters policy. Some belongings, such as cash, aren’t coved at all. Many others have coverage caps.

For instance, jewelry, watches, furs, silverware, electronics, and firearms are typically limited to one or two thousand dollars of coverage. If you have jewelry that’s worth $10,000 and it’s lost or stolen, you’d come up very short with just $2,000 of coverage.

If you have items worth more than the coverage caps, you can add an insurance rider for more coverage. This addition is known as “scheduling” your personal property. It costs more, but it gives your most expensive items separate coverage so they could be replaced.

Another often-overlooked protection you get with renters and home insurance is that your belongings are covered outside of your home.

Another often-overlooked protection you get with renters and home insurance is that your belongings are covered outside of your home. If your vacation luggage gets stolen, you lose valuable jewelry, or your laptop gets stolen from your car, your homeowners or renters policy covers it.

So, pay close attention to the insurance limits for possessions inside and outside of your home and consider adding a rider or property schedule to beef up coverage when needed for valuable items.

3. Know the difference between actual cash value and replacement cost.

It can be a little confusing to know exactly how much money you’d receive from a renters or home insurance claim. So be sure you understand the different types of policies you can buy.

Actual cash value coverage pays to repair or replace your property or possessions up to the policy limits, minus a deduction for depreciation. The calculation can vary from insurer to insurer. But what you need to know is that a cash value policy only pays a percentage of what it would cost you to go out and buy a new item.

Cash value coverage is the least expensive option. However, it means that if you experience a severe disaster, you probably won’t receive enough to rebuild your home or fully replace personal belongings.

Replacement cost coverage pays to repair or replace your property and possessions up to the policy limits, without a deduction for depreciation. That means you would receive enough money to rebuild a home with materials of similar quality. Or buy new items to replace your damaged belongings.

Yes, replacement coverage costs more than cash value. But it would allow you to replace what you lost.

There are also guaranteed or extended replacement cost policies which give you even more protection. They pay to replace your home as it was before a disaster, even if costs more than your policy limit.

Remember that a home insurance policy is based on the cost to rebuild your home and any outbuildings, not the amount you paid for the property or its appraised value.

Remember that a home insurance policy is based on the cost to rebuild your home and any outbuildings, not the amount you paid for the property or its appraised value. You never include the value of your land in your home insurance. Depending on the age, location, and style of your home, the insured value could be much higher or lower than its market value.

4. There are special types of deductibles.

A deductible is an amount you’re responsible for paying for an insured loss. The higher your deductible, the more you can save on premiums. So be sure to get quotes for different deductible amounts when shopping for renters and home insurance.

As I previously mentioned, disasters such as windstorms, hailstorms, and hurricanes, are typically covered by standard renters and home insurance. However, in some high-risk areas, you may have separate deductibles for damage caused by these disasters.

According to the Insurance Information Institute, nineteen states and the District of Columbia have hurricane deductibles: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and Washington D.C.

These special deductibles are additional and separate from the regular deductible for all other types of claims, such as fire or theft. A hurricane deductible applies only to damage from hurricanes, and windstorm or wind/hail deductibles would apply to any wind damage.

Hurricane and wind deductibles are typically given as a percentage that may vary from 1% to 5% of a home’s insured value but can be even higher in some coastal areas. The amount you must pay depends on your insured value and the “trigger” event.

For instance, if you have a 3% hurricane deductible and your home is insured for $200,000, you’d be responsible for the first $6,000 ($200,000 x 3%) in repair costs. That’s much more expensive than paying a standard $500 or $1,000 home deductible.

In some states, the triggering event for hurricane deductibles to apply is when a Category 1 storm causes damage whether it made landfall or not. Other states allow Category 2 to be the threshold. In others, a hurricane deductible applies from the moment a hurricane watch or warning gets issued until 72 hours after it ends.

A hurricane deductible can only be applied once each hurricane season, from June to November.

5. Don’t leave discounts on the table.

When it comes to the price of renters and home insurance, there are some factors you can control and some you can’t. Here are some ways to save and typical discounts to ask for:

  • Bundling insurance is when you purchase different types of policies, such as renters or home and auto, from the same insurance company. Buying two or more policies can help reduce your total cost. Just make sure that the combined price from one insurer is less than buying policies separately from different insurers.
  • Shopping around may seem obvious, but many people don’t do it. Prices can vary considerably from insurer to insurer. Be sure to compare the same coverage and deductibles to get the best deal possible.
  • Installing safety features in your home or rental, such as smoke detectors, alarm systems, deadbolts, storm shutters, shatterproof windows, or roofing, may allow you to qualify for discounts. Even being a non-smoker or being retired reduces the risk for insurers, so be sure to let them know any factors that could work in your favor.
  • Raising your deductible is an easy way to cut the cost of premiums. Just make sure that you could afford to pay it in the event of a claim. Also, the savings vary depending on where you live and your insurer, so get quotes with multiple scenarios.
  • Maintaining good credit is vital for many aspects of your financial life, including the rates you pay for home, renters, and auto insurance. Depending on where you live, having poor credit can cause you to pay double the premium compared to having excellent credit! The only states that currently prohibit home insurers from using credit when setting rates are California, Maryland, and Massachusetts
  • Being a loyal customer can pay off with a discount. However, don’t let that keep you from periodically shopping around to make sure you’re still getting a good deal.

No one enjoys paying for home or renters policy, but when disaster strikes, you’re the victim of theft, or you get involved in a lawsuit, having insurance can be a financial lifesaver.


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