Fire or Hazard Coverage? - Details?

[DSM]

Hi Everyone:

I'm a bit new here, but I could use the assistance of some good P & C guys and gals...

I'm a 17 year L & H producer.

What exactly is the Fire Insurance that is tied to the purchase of a new home. I know it's separate from homeowners insurance. And maybe it's called Hazard Insurance? All I know is that it's required for a mortgage to close...

-What is it exactly?
-When and how is it required in regards to the mortgage note closing?
-What is the commission payout first year and renewal years?

 

[djs]

I suppose if you want to get technical, fire insurance is limited peril coverage, i.e., it covers you for fire, hail, and a few other things. It would not cover your personal property or be all perils.

As you move up policy forms, you gain coverages and peril coverage. For instance, in a homeowners policy, usually theft or destruction of personal property (from a covered peril) is covered, where it would not be on a simple fire policy.

On the other hand, all homeowners policies I'm aware of cover perils such as fire, hail, etc, as well as stranger things like a car driving through your living room, parts falling off airplanes, etc, plus they add in liability insurance, so if you dog bites someone, someone gets hurt due to your unintentional negligence, etc, there is at least some coverage.

Lenders require coverage so if something happens to the house, their interests are protected. This means it has to be in place at closing time and then remain in force while the loan is on the property.

Commission varies, for planning purposes, I would use 18% first year, 14% on renewals. Make adjustments to this as you need.

This is a VERY short answer to a very big question. Someone else may respond with more details, but hopefully this will get you started.

Dan

 

[DSM]

Thanks Dan.

So if someone intends on purchasing homeowners, why would they need the fire/peril coverage? The way I understand it, this fire/peril coverage is a requirement to get a mortgage closed? Also, the way I understand it you aren't required to have homeowners if you paid cash for your home?

Your previous reply was very helpful...Just trying to hone in on this a bit more. Thanks for any help you (and anyone else) can provide.

 

[djs]

Usually you buy homeowners coverage, which covers the peril of fire and many other things that can happen to go wrong. You need the fire coverage in case the house catches fire. Without it, the loss would not be covered. Some homeowner policies name the perils that they will cover, though HO-3/5's are what are called all peril (or open peril) policies, which mean they cover everything except what is excluded. Here in CA, the big exclusions are earthquake and flooding (i.e., a river comes through your house).


Since google is my friend, you can find a decent description of the various homeowner policies at
Home Insurance Policy: Homeowners Insurance Policy - Progressive

Keep in mind that even the HO-1 policy shown in the chart covers more than a true 'fire policy' (DP-1) did. To be honest, I don't know very many agents that will sell a true fire only type policy anymore. I've sold 1 in all of my years and only because that is what the person wanted.

A 'fire-policy', or a DP-1 policy, does not include theft coverage or vandalism coverage. You do not want to sell this, even for a vacant home. The lack of vandalism coverage will cause problems.

Not to many places sell a true 'fire' policy anymore, but the lingo sticks around a lot. I'll call it a fire policy even though it is actually a homeowners policy.

Don't complicate it.
Homeowners policy - single family house that the owner lives in.
Landlord policy - single or multi unit structure (usually max of 4 units) that the owner may or may not live in. Usually only provides a very limited personal property coverage.

The bank wants to make sure they are made whole if something happens to the property while they are the lienholder. If you own it outright, nobody is going to force you to have insurance.

Of course, if you don't have insurance and have a loss, it is on you to fix it. Seems silly to try to save maybe a $1000 a year and put a few hundred grand at risk.

 

[Bertolinoins]

Those are dated terms that banks use. You are either selling a homeowners policy or a dwelling fire (landlord policy).

 

[Milkman1265]

in my area,

fire or hazard insurance is what needed by the bank to protect the building.

you can get a DP1 for a owner occupied and that will still satisfy the mortgage company.

but like the rest say

homeowner/ho for owner living
dwelling fire/dp for when tenant lives there and you can not get a ho policy