If you are like most people, you will buy a home by making a down payment and getting a mortgage loan for the balance. You may have accumulated a large amount to apply toward your down payment. Or you might have a minimal amount to invest. If that amount falls short of 20 percent of the home’s value and you are getting a conventional loan — one not backed by the federal government — be aware that you will most likely have to pay for private mortgage insurance.

Private mortgage insurance (PMI) is a policy that protects the lender against financial loss if you default on your loan. Experience tells them that the more money you put into a home, the lower the risk. You are far less likely to walk away from your loan when you have a substantial amount of cash to lose in addition to your home. On the other hand, the less invested you are financially, the higher the risk. Because lenders seek to minimize risk, they want either a substantial down payment, traditionally 20 percent, or insurance that will pay them the principal amount if they foreclose.

As you can see, lenders benefit from PMI. But borrowers pay for it. The rationale is that you are paying for coverage that enables the lender to grant what would otherwise be a riskier loan. How much can you expect to pay? Premiums vary. Factors that affect cost include the type of mortgage and the amount of your down payment. Generally, you can expect PMI to be about 0.5 percent of the loan amount. Here is an example using that percentage assumption. Let’s say the home value is $200,000 and you make a 10 percent down payment. PMI would add approximately $75 per month onto your mortgage payment.

So how can you avoid paying PMI even when your down payment is less than 20 percent? Lenders offer other options for which they will determine your eligibility. Some lenders waive their PMI requirement if you pay a higher interest rate on the loan. What they do is pay the premium for you and build the cost into the interest rate. Another option is called a “piggyback” loan. Under this arrangement, you have two loans – one for 80 percent of the home’s value and another for the balance remaining after your down payment. You might also ask if the seller is willing to carry the second mortgage. No matter which option you consider, do so in light of your personal financial circumstances. Also, when comparing the cost of each option against PMI, remember that mortgage interest is tax deductible and PMI is not.

If you are in the process of getting a loan and PMI is unavoidable, or if you already own your home and have been paying PMI for a while, don’t despair. It does have an end. When you have at least 20 percent equity in your home (home value minus loan balance), you can ask to have PMI cancelled. In order for that to happen you must have a good payment history, current payments, and no liens against your home. Some loans also have a minimum wait time, typically two years, before PMI can be eliminated. Also, when you make your request, expect your lender to ask for proof of the home’s value in the form of an appraisal. They may even ask you to pay for that appraisal.

Even if you don’t request cancellation of PMI, the Homeowner’s Protection Act of 1998 calls for automatic termination of PMI if the following conditions are met:

• Your loan to value ratio must be 78 percent or lower (22 percent equity or more)
• Your loan must be covered by the Act. Federal Home Administration (FHA) and Veterans Administration (VA) loans are not covered. In addition, there are different requirements for loans that are classified as high-risk.
• You must be current on your mortgage payments.

PMI costs can add up quickly. If you are already paying, keep close track of the equity in your home and request cancellation as soon at the 20 percent marks comes around. Pay only as long as you absolutely have to. If you are in the process of getting a loan, do your homework. Explore available options with your mortgage lender and ask them to fully explain all conditions that apply to PMI. That way you will be better prepared to select the loan option that is right for you.

Home building insurance is insurance which provides protection against the cost of repairing/rebuilding the structure of your home in the event that something unwanted should happen – fire, water/flood, storm, burst pipes, being some of the classic examples.

Unlike other types of insurance policies, home building insurance is rarely a voluntary undertaking – in most cases you home mortgage provider has insisted that you take out the policy in exchange for their having provided you with the home mortgage.

Insurance for Protecting your Home

What does home building insurance insure against? It is essential that you know, and fully comprehend, that home building insurance is insurance against the cost of rebuilding your home – it is not, nor was it ever intended to be, an insurance policy against the value of your home (against which you can take out insurance).

How are costs calculated?
Quite simply, the costs of rebuilding your home are the costs of rebuilding your home. To assess this, you are usually required to ask one of the insurance company’s assessors to come and view your home and place a value on the home. The home building insurance premium will then be based on this assessed value. Of course, included in the actually cost of rebuilding your home – i.e. the cost of the materials and labor needed in order to rebuild your home.

As you can no doubt see then, home building insurance is not a static insured sum, as both the value of your home, and the cost of part and labor to fix anything that goes wrong with the home will increase over time. But, the onus of remembering this is on you – so, you will need to calculate the rising cost of rebuilding your home.

Getting cheap home building insurance
If you are looking for home building insurance, you will note that a lot of policies are offered, and the price varies dramatically. Basically, home building insurance bought on the Internet has often proven to be the cheapest, but it has also proven to be the type of policies that have the most exemption clauses – so although the premium is cheap, the cost of the repair is the same and you may end up having to pay some money yourself. As such, ‘cheap home building insurance’ means finding a nice balance between premium payable and home contents insurance policy exemption clauses.

Second home building insurance
As a nation we are becoming richer, and enjoying the spoils of becoming richer means more and more of us these days enjoy the benefits of a holiday or vacation home. If this scenario sounds familiar, please keep in mind that if you do not live in the vacation home full time, then the home building insurance premium is likely to go up as the risk factor of anything happening is also considered to be higher.

Most people work really hard for their home and everything in it, and it can take many years to build up your home from scratch. However, like anything else in life, your property and everything in it is at risk from dangers that are often beyond your control, and this could easily wipe out everything you have spent years working hard for.

Although you may not be able to totally eliminate the risk of unforeseeable dangers to your home, you can eliminate the financial risks involved by taking out homeowner insurance coverage.

Homeowner Insurance Coverage
This coverage offers invaluable peace of mind to any homeowner, and will enable you to pick up the pieces and recoup financial losses in the event that your home and belongings are damaged or even destroyed. When you take out your insurance, you should ensure that you are providing yourself with adequate coverage to cover the value of everything you own in your home and, of course, your home itself.

Depending on what type of damage your home incurs, you could find yourself and your family have no place to stay for a while. For instance, if your home has been contaminated or there is a fire, you may find that you have to find alternative accommodation whilst the problem is being sorted out. Some insurance policies will foot the bill for hotel or alternative accommodation whilst your home is being repaired. This is in addition to the valuable cover provided on your home and belongings.

Estimate your Home’s Worth
When you take out home insurance, you should first get an idea of what your actual home is worth. You can do this by getting a valuation on the property or by working out how much it would cost to replace the home at current prices. You also need to take an inventory of your belongings and keep this somewhere safe. This will enable you to put an approximate value on your belongings and may also prove invaluable in the event that you need to make a claim.

Check Homeowner Policy Details
One common mistake that many homeowners make is to not check the policy details before making a commitment. It is only when something happens that they realize that they are not actually covered for an adequate amount, or there are certain items that they are not covered for.

Before you commit to a policy, you should make sure that you read every bit of the policy – including the small print! This will help to ensure that you have a policy that will provide the right level of cover. If you have any questions with regards to the policy before you make a commitment, you should address your concerns with the insurer. It is important to be one hundred percent confident about the policy you are taking out before you commit – after all, you are paying to provide your home and belongings with financial protection, so it is vital that you ensure you are getting the right levels of coverage.

Home Contents Insurance

In short, a home contents insurance policy insures against the contents of your home being damaged, lost (in certain circumstances) or stolen. As the name suggests, primarily this type of insurance is insurance against any of these unpleasant events happening to items in your home; however, reading a home contents insurance policy carefully may mean that there are certain circumstances under which you may claim against the home contents insurance policy even when one of these events happens outside of the home.

How does the policy work? Like all insurance policies – to one extent or another – home contents insurance works on the basis of the total sum insured. As such, when you are filling in your home contents insurance policy submission form, you are asked to provide a breakdown of all the major items in your insuring. However, you do need to be careful because most home contents insurance policies have a threshold amount, over which you need to individually declare (and possibly insure) the item as a separate item, and which may not be allowed to include in your overall home contents insurance policy.

How is the ‘value’ calculated? As we all know, 90% of the items we have in our home are of no value to anyone but ourselves – they have real sentimental value. However, for the purposes of your home contents insurance policy, ‘sentimental value’ means nothing – your premiums are calculated on the cold hard cash cost of replacing that item!

Cataloging your home In order to give both yourself and you insurance company a better understanding of the items that are in your home and that are being insured, it is always a good idea that you catalogue the items in your home. An increasingly popular way for people to catalogue the valuables in their home to go around the house with a video camera and taking video footage of each room.

What about risk factor? All insurance is based on risk – the risk of the insurance company having to pay out – and home contents insurance is no different is this regard. So, if you live in a neighborhood of high crime, you should expect insurance companies to either refuse to insure you or to ask for very hefty premiums. Alternatively, if you live in a nice quiet neighborhood with little or no reported crime, then you should expect your premiums to be very low indeed.

Renewing your home contents insurance It is something most people who have home contents insurance forget, yet it is essential that you do it right: when it comes to time to re-insure your home contents, you must remember what you bought over the last year so that you can add this to you new policy. To do otherwise means that these items are unlikely to be insured. Likewise, you must remember that a gap may grow between the real value of replacing items that increase in value and the items insurance value (a classic example, diamond rings). On the other hand, the cost of replacing items that deprecate in value, such a television, may go down from what they were last year, but may go up again if such items become considered collectors’ items or antiques!

Nobody knows what life has in store for them from one day to the next. It’s not something that we like to dwell on, but the fact of the matter is that a sudden and fatal accident or illness could result in our family being left to fend for themselves.

This could lead to all sorts of problems for your loved ones, most notably financial difficulty. Left to try and deal with monthly commitments and family debts, your family may be unable to cope financially without your income, and could end up losing everything they own.

Life Insurance Coverage
There is a way that you can provide peace of mind for yourself and security for your family, and that’s by taking out life insurance coverage. Life is full of unexpected twists and turns, some good and some bad. Life insurance coverage offers financial protection for your family in the worst-case scenario. You have a number of options when it comes to taking out life insurance coverage, and it is important to assess your needs before you commit to a policy.

Policy Coverage Types
Many couples today opt for a joint policy, as this covers the family if either of them passes away. However, you can also go for an individual policy based upon your needs and preference.

The two main types of insurance coverage are ‘term’ and ‘whole life’. Term coverage is the cheaper option, and is a very popular type of life insurance. You can get term coverage at affordable prices, and this type of policy covers you for a specified term, such as ten or fifteen years. Upon expiry of this term, your cover is declared null and void, and there is no financial gain or cash back.

Whole Life Insurance
A whole life policy is slightly different in that it covers you for life. Providing premiums have been kept up to date on the policy, your family will receive a payout whenever you die (subject to terms) and therefore many people see this as more of an investment type life insurance policy. Because of the benefits, this is a more expensive form of coverage with higher premiums, but can also provide additional peace of mind and security.

Payout Benefit
The payout from any form of life insurance coverage will prove invaluable to your family for a number of reasons. If you are an income earner and you pass away, your family will still be left to handle financial commitments and debts, other than those that may have been covered separately. The life insurance payout will enable your loved ones to pay for funeral costs and to settle as much debt as possible. In short, this type of coverage will ensure that your family has a more financially stable future in the event that you are no longer around to provide an income or contribute to the household finances.

Most insurers offer a range of plans to suit all sorts of needs and budgets, and because you can pay premiums on a monthly basis, you will not have to take a huge hit to your finances in order to benefit from this type of coverage.

Types of Life Insurance Available

A life insurance policy means many things to many people. To some, having a life insurance policy means that they’re thinking about adequately providing for their loved ones should anything unexpected happen to them. To others, having a life insurance policy means that their home mortgage will be paid off should they unexpectedly die. And, in a nutshell, that’s the thing about life insurance – it really is a general term that covers a multitude of circumstances.

Looking at the different types of life insurance available more closely then, the following are some types of life insurance to choose from to suit your personal needs:

Whole Life Insurance Policy
Sometimes also known as “universal” life insurance, whole life insurance is probably the most common of the life insurances policies that you’ll come across. The policy is fairly simple – it works on the basis of a basic permanent insurance plan into which you pay periodic payments, most commonly monthly, and provides protection to your beneficiaries over the course of your life. The downside of whole life insurance policies is that the lump-sum payment paid out on your death is calculated at the outset of the policy, and premiums are then calculated on this.

As you may be able to see, it fails to factor in the increased wealth factor of the insured and their loved ones as they get older and earn more money. Nor does it include the additional expenditure they’ll be making as they buy bigger and bigger (and more costly) housing and cars. This is certainly one factor you need to consider at the time of taking out the life insurance policy, or else you’ll be forever “topping up” the policy with additional policies. The upside of whole life insurance policies is that your premiums are fixed over the term of the policy, and so it does make it much simpler to budget for this.

Term Life Insurance Policy
The significant difference between term life and whole life insurance policies is that term life insurance policies factor in continued risk assessments. In other words, as the risks in your life change, so does your policy. To account for this, the premiums on term life insurance policies are also variable – so that if you are considered a high risk, you pay a higher premium than if you are considered a low risk.

Cost factors – which is cheaper and more affordable?
When considering which of the two principal life insurance policies available is the cheaper, you need to consider the following:

– age: obviously, as you get older, you’re mortality starts to show itself more than when you are younger. So, the age you are at the time you take out the policy will factor in the cost of your premiums;

– health: like age, health is an important factor in the risk assessment of anybody looking to take out a life insurance policy. Included in the health aspects of the risk assessment will be whether or not you smoke, are overweight, do regular exercise, etc;

– family history: with doctors telling us that more and more fatal diseases are generic in nature, your family health history will also be factored into your policy calculations;

– driving record: may sound strange, but a background check is usually undertaken to see if you have a poor driving record. If you do, expect to pay a higher premium.

Finally both whole life and term life insurance policies require you to undertake a physical check-up – and it probably this, as much as anything else, which will determine the risk assessment.