ABOUT HOMEOWNER'S INSURANCE

A phrase commonly used by mortgage lenders to explain to potential homebuyers what constitutes a typical mortgage payment is "PITI" which stands for Principal, Interest, Tax, and Insurance. The principal and interest are the same as any other type of loan you take out: it is the amount of the actual payment against the debt plus the accrued interest. The tax is your real estate tax that is determined by the location of the property to be purchased. And finally, the insurance refers to your homeowner's insurance that protects the home and your possessions inside from theft and damage.

Questions often arise concerning home owners insurance, questions regarding type and amount of coverage, services offered by the insurance provider, and the like. The Daytona Beach Area Association of REALTORS offers the following advice to potential homebuyers concerned with homeowner's insurance: Do your homework.

The first thing you must realize is that hazard insurance (as it is commonly referred to) is required by your lender. This is no big surprise for the simple fact that it is their money that is invested in your property. Most buyers take the next step, though, and get a comprehensive policy.

A comprehensive policy takes your coverage beyond fire and similar hazards and covers such things as personal possessions, personal liability, vandalism, theft, minor water damage and loss of use of the dwelling. Some advanced policies will even pay to rebuild your home even if the cost to rebuild exceeds your policy limit.

Costs and limits of these policies vary. As for the cost of your homeowner's insurance, discounts are usually available for new homes and for homes with security systems, smoke alarms and dead-bolt locks. Discounts also may be available for non-smokers, persons age 50 and over, and persons carrying their auto policy with the same provider of their home policy.

Limits of coverage include homes that have shake roofs, old electrical systems or are built on a slope. Areas that could result in denial of coverage include a buyer's frequency in paying his or her bills late, or a buyer who has made many claims against insurance companies.

In selecting your insurance provider, make sure that your agent agrees to perform the following:

• Run a complete Replacement Cost Estimate on the house to ensure that the home can be rebuilt for the amount for which it's covered.
• Personally speak or meet with you, detailing what their policy will and will not cover as well as the procedures that will follow.
• Guarantee continued service throughout the life of the insurance policy, with specific yearly reviews that update the coverage and ensure that all discounts are applied.
• Personalized claims service in the event of a problem.

As you can see, there are many options available, and criteria to be met, in obtaining a homeowner's insurance policy that is right for you. The Daytona Beach Area Association of REALTORS recommends that you do your homework and investigate all the policies available.

If you have any questions about your PITI, don't hesitate to contact your REALTOR.