DON'T KNOW HOW MUCH COVERAGE

[LINDA]

I AM IN THE PROCESS OF GETTING A CONSTRUCTION LOAN FOR A LAND/HOME DEAL. BEFORE I CLOSE ON THE PERMANENT LOAN THE LENDER REQUIRES 1 YEAR INS. PAID AT THAT TIME OF CLOSING.
I CHECKED OUT FARM BUREAU INS. BUT TO MY SURPRISE THEY TOLD ME THEY CAN'T COVER THE AMOUNT THE LENDER IS REQUIRING. THE LENDER TOLD ME THAT THE COVERAGE MUST BE FOR THE FULL AMOUNT BEING FINANCED, BUT THE INSURANCE COMPANY IS SAYING THEY WOULD ONLY COVER THE HOME, AND ADJACENT STRUCTURES.
I'M CONFUSED ABOUT HOW THIS IS SUPPOSE TO BE HANDLED. I AM PLANNING ON OBTAINING CREDIT LIFE INSURANCE ALONG WITH THE COVERAGE OF THE HOME, BUT WHAT I DON'T UNDERSTAND IS WHY IS THE LENDER REQUIRES THE FULL LOAN AMOUNT FOR COVERAGE ON THE LAND AS WELL AS THE HOME, AND OTHER STRUCTURES.
I COULD USE AS MUCH ADVICE AS I CAN GET. I DON'T KNOW IF THE LENDER HAS AN AGREEMENT OF SOMEKIND WITH THIS INSURANCE CO. FOR KICK BACKS OR WHAT THE STORY IS.
DOES THIS SOUND LEGITIMATE? HOW DO I GET THE KIND OF COVERAGE NEEDED WITH AN A+ INS. COMPANY?
THANK YOU,
LINDA

[rmurray]

This is a constant problem...This happened to me when I purchased my first home in 1979...I argued that it was foolish to try to cover and pay for coverage of the land that would never possibly have a claim for...Ultimately I had to do what they said...but soon after closing I had my agent change the coverage and waited to see what would happen...I thought it would be interesting seeing them explain to a judge...Nothing happened and I had a loan on that home for 17 years before selling it..

Every state has different laws...some do not let the insurance company sell you insurance for more than they could possible pay out..as is this case..GA has just such a law...but...agent handle it differently..even the company you mentioned..some agents write the coverage anyway..Some states even forbid the lenders from this requirement...but try to explain that to the lender...

If the home was already on the land...they and you would have no idea of the amount of the price of the home alone...Sometimes we have to produce a purchase agreement that includes the land to satisfy some insurance companies...

Worst case is that you will have to suck it up for a year...then buy from the company of your choice..with coverage you decide is right for you..