When same sex partners, or any other couple, purchase a home, there are certain types of insurances that are important to purchase to protect you. If you obtain a mortgage to finance your home, the lender generally requires title and mortgage insurance. Below are types of insurance that may be required. Note that laws in different states vary regarding the types of insurance that is required.
A title is your deed of ownership of the home. Title insurance provides coverage to protect the lender, and the borrower in some states, from problems that may not have been found prior to the sale of the property that could affect ownership. They first create an abstract of the property by examining public property records to ensure that the seller has a valid title that can be transferred to a buyer. The abstracts will describe any potential problems with the title such as unpaid property taxes, liens against the property due to unpaid debts and unfiled deeds.
If any problems arise after ownership is transferred to the buyer during the life of the loan that the title company did not uncover when creating its abstract, the insurance would pay for the defense for any damages that resulted from the lawsuit. For example, the owner died and his children inherited due through state intestacy laws because the owner did not have a will. At some later date, a child from a previous marriage sues because he was not part of the inheritance and claiming that he should have received a portion of the home.
Owners Title Insurance
If title insurance only protects the lender, you may be required to purchase a separate homeowners title policy that will protect you and your partner. This type of insurance protects you and your partner against title defects that could result in the need for legal counsel and protects the equity in your home. For example, although the lender is covered by the title insurance, if you end up losing your home due to a defect, you will be unable to recover any of the equity that you have in your home. Equity is the difference between the market value and the amount that is owed on any loans against the property.
Generally, if you make less than a 20 percent down payment, the lender will require that you purchase mortgage insurance. This type of insurance will cover any losses by the lender that may result if you fail to pay your mortgage. The premium is generally included in your monthly mortgage payment and will be discontinued when you have paid enough to equal 20 percent of the loan.
Most mortgage companies require that you maintain a homeowners policy that will cover the cost of replacing the home or a minimum of the amount of the mortgage. If you do not maintain the insurance, the mortgage company can obtain the insurance for you and include it in your monthly mortgage payment. The cost in those instances is generally much higher than you were paying and only covers the structure of the building.
Your homeowners’ policy should cover the structure, your contents in the home, and injuries to others or their personal property while at your home. There is additional coverage that can be purchased including other structures, such as garages and barns, and loss caused by natural disasters or events such as flooding and earthquakes. Those types of coverage are generally not included in a standard homeowner’s policy and must be requested. Standard coverage may, depending on the state that you reside in, cover wind and hail damage.
The above is a general outline of required insurance coverage’s when you purchase a home. Your real estate agent can give you more details related to the necessary insurance coverage in your state and can refer you to an LGBT friendly insurance agent. If you plan to purchase a home, a search on GayRealEstate.com can help ensure that you find an agent that you can trust and are comfortable working with. For more information on hiring a real estate agent, see our articles Top 10 Reasons to Hire a Gay Realtor for your Home Purchase and Top 6 Questions Every Gay Home Buyer Should Ask Their Realtor.