What Is A Homeowner's Insurance Policy or Binder?

In preparing my clients for an upcoming closing/purchase of a property,  I reminded them that they would need a "Homeowner's Insurance Binder".

And the question came back:  What is a Homeowner's Insurance Binder?
And, here is my answer:

The mortgage company requires that you obtain homeowner's insurance on the home you are purchasing. They may require you to pay for the first year's premium up front prior to closing and bring a "binder" showing that you have the insurance in place.

The binder is basically a certificate that your insurance agent will issue that shows you have insurance and what your coverage is.  Most importantly will list the mortgage company as a "loss payee" - that is, if there were a fire or other incident and the home was lost, the mortgage company would be covered. If you call your insurance agent and tell them you need a binder for a closing, they will know exactly what you mean.

The mortgage company has requirements as to how much coverage you must have and how the loss payee clause should read. You will at least want it insured for the purchase price and most mortgage companies will require replacement cost coverage.

For a list of insurance companies in Massachusetts please email me and I will be happy to recommend some of the local Ma Home Insurance agencies.

Email Martha Anger


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