Warm-Up 5/18/16. Selling Price: $342,000 Down Payment: 12% APR: 7.00% Term: 25 Years. Mortgage Amount? Monthly Payment? Total Repaid by end of term?

Transcription

1 Warm-Up 5/18/16 Selling Price: $342,000 Down Payment: 12% APR: 7.00% Term: 25 Years Mortgage Amount? Monthly Payment? Total Repaid by end of term? Total Interest Paid?

2 Homeowners Insurance

3 So far we ve learned how to $800 + $100 + $100 + $100 = $1,100 Principal Interest PMI Real Estate Tax Escrow Homeowners Insurance Total Monthly Payment

4 10-6 Homeowners Insurance To protect your property (land, home, and what s inside) from fire, theft, etc. you ll need homeowners insurance. This often includes: Loss-of-use coverage: pays for the hotel you will stay in if home is damaged. Personal liability & medical coverage: May cover costs someone gets hurt at your house and takes you to court.

5 10-6 Homeowners Insurance To receive full payment for any loss up to the amount of the policy you have purchased, you must insure your home for at least 80% of its replacement value. Replacement value = the amount required to rebuild your home if it s destroyed. Total amt of coverage = replacement x percent insured on home value

6 10-6 Homeowners Insurance The total coverage is then split into 3 types of specific coverage. The amount you can receive if something goes wrong at your home will depend on where/what is wrong. How do I find the amount of coverage for each type of protection? Amount of coverage = Amount of Coverage x Percent Covered on Home Coverage Percent Covered Garage & other structures 10% Loss of use 20% Personal property 50%

7 10-6 Homeowners Insurance Example: Replacement value of home is 159, % of the home is covered. What is the amount of insurance? What is the amount of coverage on personal property? What is the amount of coverage on loss of use? What is the amount of coverage on their garage? Coverage Garage & other structures 10% Loss of use 20% Personal property 50% Percent Covered

8 10-6 Homeowners Insurance Example: Replacement value of home is 159, % of the home is covered. What is the amount of insurance? What is the amount of coverage on personal property? What is the amount of coverage on loss of use? What is the amount of coverage on their garage? Coverage Garage & other structures 10% Loss of use 20% Personal property 50% Percent Covered

9 10-6 Homeowners Insurance Example: The replacement value of Justin and Leslie s home is estimated at $94,000. They have insured their home for 80% of its replacement value. According to the given table, what is the amount of coverage on their personal property? Loss of use? Garage? Total Coverage= 94,000 * 80/100 = 75,200 Personal Prop = 75,200 * 50/100 = 37,600 Loss of Use = 75,200 * 20/100 = 15,040 Garage = 75,200 * 10/100 = 7,520 Coverage Garage & other structures 10% Loss of use 20% Personal property 50% Percent Covered

10 10-7 Homeowners Insurance Premium Homeowners insurance policy premium = the amount you have to pay annually for insurance coverage. Top determining factors: Location! Fire protection class: how fire resistant is your home? Type brick, mobile home, log cabin? How close to water source?

11 10-7 Homeowners Insurance Premium How do I find the insurance premium for my home: Step 1: Find the total coverage for your policy: Step 2: Use a Table to find premium. Need following info: Home Type Fire Protection Class Total Coverage Amount Step 3: IF you want to know the MONTHLY payment, DIVIDE annual premium by.

12 10-7 Homeowners Insurance Premium Example: Morris home has a replacement value of $150,000. He has insured his home at 80% of its replacement value. If the home is wood-frame and has a fire protection class rating of 4, what will his annual premium be? If he wants to budget for this cost on a MONTHLY basis, how much will this amount be?

13 10-7 Homeowners Insurance Premium Example: Morris home has a replacement value of $150,000. He has insured his home at 80% of its replacement value. If the home is wood-frame and has a fire protection class rating of 4, what will his annual premium be? If he wants to budget for this cost on a MONTHLY basis, how much will this amount be?

14 10-7 Homeowners Insurance Premium

15 10-7 Homeowners Insurance Premium Example: Putting it all together! You are buying a home with a Selling Price of $500,000, you put 21% down and get a 20-year mortgage with an APR of 7.5%. You plan to insure the home for 85% of its replacement value which is $312,500 (it s wood-frame & fire protection class rating is 10). The area where you will live has a rate of assessment = 55%, tax rate = mills. What will your TOTAL monthly payment be?

16 10-7 Homeowners Insurance Premium Example: Putting it all together! You are buying a home with a Selling Price of $500,000, you put 21% down and get a 20-year mortgage with an APR of 7.5%. You plan to insure the home for 85% of its replacement value which is $312,500 (it s wood-frame & fire protection class rating is 10). The area where you will live has a rate of assessment = 55%, tax rate = mills. What will your TOTAL monthly payment be?

17 10-7 Homeowners Insurance Premium Your Assignment: P. 358 / 1 9 odd & P.360/ 1 7 odd Question 7 will require you to look back at previous sections notes and examples. THIS QUESTION IS WORTH DOUBLE POINTS. DON T SKIP IT!