20211005 Three Types of Insurance Policies In a Real Estate Transaction - YouTube

Hey guys, this is Sam with Keller Williams Realty  and in today's video, we're going to go over a  

topic that we have not discussed before. Yes,  it's insurance. In a real estate purchase or  

sale transaction, there could be either of these  three different types of insurance that we will  

come across. First one is going to be title  insurance policy. Now, depending on whether  

the property is being purchased all cash or with  a mortgage, we could come across one or more of  

these two subcategories. The first subcategory is  going to be the owner's title insurance policy.  

As the name suggests, it protects - it ensures,  the owner's interest as far as the title of the  

property is concerned. Now, just like when we  buy a car, we get a clear title to the car.  

Just like the same way, when we  get a [home], when we buy a home,  

the owner's title policy is something that  covers the owner's interest on the property.  

It is issued and paid for at the time of closing  and it is usually issued for the purchase price of  

the property. It's only paid one time. The loan  policy or the lender's title insurance policy  

is something that protects - that insures  the lender's interest to the property,  

should there be a problem arise with the title to  the property is concerned. Okay, it is issued and  

paid at the time of closing and it is usually  issued for the loan amount of the property. It  

is only paid once just like the title insurance  policy. The second sub-category [oops!] the second  

category of insurance that we come across is  going to be hazard insurance like or the liability  

insurance, okay! Just like when you buy a car,  you get liability, you get liability insurance,  

especially if you're buying car with the loan, the  lender requires that we insure the collateral or  

the car. Same way, in a home purchase, if  the buyer is buying a house with a with a  

mortgage, then that is something that the lender  will require that the buyer or the borrower  

to have. The hazard insurance policy covers  the structure as well as the belongings of  

the property. If the property is being purchased  as an owner occupant property where the buyer is  

going to buy to live in it, then that covers  both the structure as well as the belongings  

okay, but if the property is being purchased as  a rental property, you know a landlord property,  

in that case, the buyer would go and get  what is called the landlord insurance policy  

and will require the tenant to carry what is  called the renter's insurance policy. The renter's  

insurance policy would cover the belongings  of the property and certain damages that the  

tenant would cause to the property. On the other  hand, the landlord insurance policy would cover  

the structure of the property, not the tenant's  belongings. If the property is being purchased as  

an owner occupant but the buyer is letting  the seller stay there for some time after  

closing before the buyer takes possession  of the property, then there's going to be  

what is called the leaseback period. During this  time, the buyer would go and get what is called  

landlord insurance policy and would require  the seller, who is now the tenant, to carry  

the renters insurance policy. Alright, the third  type of insurance that we'll come across is going  

to be the mortgage insurance policy, and as the  name suggests, it basically protects the lender  

should the buyer or the borrower default on the  loan which basically means he's not able to pay  

the mortgage down the road. Depending on whether  the loan is FHA or Conventional, it could be  

called two different things. If it's an FHA loan,  it will be called MIP - mortgage insurance premium  

and if it's a conventional loan. it's called PMI  - private mortgage insurance. In an FHA loan,  

the mortgage insurance payment could be paid both  upfront at the time of closing and on a monthly  

basis, and on a conventional loan, if the buyer is  putting down less than 20 percent on the mortgage  

of the purchase price. then the lender requires  that the buyer or the borrower pays what is called  

a monthly PMI (private mortgage insurance). If  the buyer is paying 20 percent or more which is  

one-fifth of the purchase price, in that case,  there is no PMI that the borrower is required  

to pay on a monthly basis. So, those are the  three different types of loan [oops! :)] three  

different types of insurance policies  with two different types of subcategories.  

If you have any further questions regarding  selling, buying or investing, you're welcome  

to give me a call at 972-666-7072. This is  Sam with Keller Williams Realty signing off.