Bob Northern & Company
12540 Patterson Ave
Richmond, VA 23238
Tel: 804-708-9463 • Fax: 804-708-9467
The Closing Process
What types of insurance are involved in a Real Estate transaction?

Seven types of insurance used in Real Estate transactions

Types of insurance involved in real estate transactions include:
Fire Insurance
You must pre-pay a full year of fire insurance premium in advance at closing into your escrow account. This is called a "prepaid item".
Only the structure is covered-no contents
Home insurance premiums are rated based on brick/frame construction and zip code.
Homeowners Insurance
You must pre-pay a full year of homeowner's insurance premium in advance at closing into your escrow account. This is called a "prepaid item".
Replacement -- replaces item at todays cost
Depreciated -- gives depreciated value of item
Extended coverage -- injury on property, hail, frozen plumbing leak damage
Personal property items e.g. jewelry, guns, stamps, collectibles
Automatic inflation coverage is possible
Floods are not included -- flood insurance is separate
Life Insurance
Term -- no cash build up. Cheap insurance. This can be paid in annual payments to your insurance agent.
Credit life insurance-decreasing term life insurance. Equals the amount of the outstanding loan balance. Offered through lender or lender's agent at a grossly inflated cost vs. Level term insurance. You are much better off obtaining a term insurance policy from your homeowners/automobile insurance agent. The cost through them is about one fifth of what your mortgage lender will charge you for the exact same coverage!
Builder's New Home Warranty
One year from builder for all components and labor.
5-year footing and foundation warranty from a soil engineer if there is shrink-swell soil.
10-year extended warranty is possible for structural defects that make the home unsanitary or unhabitable. The threshold that requires correction is grossly inadequate. Read the policy before you buy the home to see it is more for marketing and public relations than of actual value.
There is no charge for this insurance to the purchaser
American Home Shield Resale Home Warranty
Is it renewable? -- yes, annually
Cost -- approximately $395.00
Coverage -- one year coverage on mechanical systems & appliances
Deductible -- $50.00
Designated service representatives must be used
There is no age restriction on homes
Please contact us for detailed information regarding this outstanding insurance program.
Private Mortgage Insurance (P.M.I.) is required with any conventional loan that has less than 20% down payment. There is an up front charge for P.M.I. at closing usually in the amount of 1-2% of the loan amount. In addition, the purchaser pays an amount equal to about one half of one percent to carry P.M.I. on their home. Private mortgage insurance insures the lender from loss if you default on your house payment.

Can P.M.I. be waived down the road, as my home becomes more valuable? Most of the time, yes. The loan amount must either be 80% of the original loan to value or if the present loan to currently appraised value is 75% or less. Make sure to ask your lender to be sure you know the terms.

P.M.I. can be avoided all together by using 80-15-5 or 80-10-10 loan.
Mortgage Insurance Premium (M.I.P.) is required by the housing and urban development (H.U.D.) on all federal housing administration loans (F.H.A. loans). The M.I.P. original cost and monthly cost is similar to the P.M.I. on conventional loans, but the mip never drops off the loan no matter what the loan to value ratio is.

Title Insurance

Title insurance is the only insurance you get to protect you from the past! It guarantees you that if anyone claims to have an interest in your property, they will defend the suit to "quiet the title".
Who Should I Choose to be My Insurance Agent?
Keep your present auto agent -- you already know and trust him or her!
Multiple policy discounts are available
Get your life insurance from your own agent rather than your mortgage company!