Article provided by Danny Newman at Goldfus Insurance
There are many steps to purchasing a property – especially if you need to take out a mortgage to do so. Some of us will choose to work with a mortgage broker, while others will take on the challenge alone. In the excitement of it all, many people rush over one of the most important elements – mortgage life insurance and structure insurance.
As this is something that banks often tell people about at the last minute, these insurances are often implemented in a hurry without really looking into the details of the policies being purchased or correct consideration of all the necessary elements. In this two part series we will explain about mortgage life insurance and structure insurance in Israel.
In this article we will be focusing on the key elements of structural insurance so you can be sure that you are putting a comprehensive policy in place.
Is there more than one way of insuring structure?
In essence, there are two ways of insuring structure: Rebuild Value Insurance and Market Value Insurance.
The banks usually only require the mortgage holder to purchase the rebuild value policy up to the bank’s commissioned appraised value. Often, this rebuilding value required by the bank may only cover the bank’s insurable interest, and may not fully cover the full value of the home or upgrades such as high level flooring, upgraded kitchens, central AC systems etc. It is still possible to purchase either more comprehensive rebuild value or market value insurance policies with a lien to the mortgage bank on the policy, to meet the bank’s requirements. Therefore it is important to understand the differences between the two options.
So what is the difference?
Rebuild Value Insurance covers the cost of rebuilding the structure (based on the size of the property) in the event of total damage, giving you the ability to rebuild your structure on the property/land that you already own. The disadvantage in insuring the Rebuilding Value, is that the rebuilding of the structure may be delayed or dependent on your neighbours’ ability to rebuild. While this is the basic level of cover required by the bank, it does not necessarily mean that it is the correct policy for you.
Market Value Insurance covers the structure according to the market value at the time the policy is set in place. In the event of total damage, the insurance company takes ownership of your property, giving you the ability to take the money from the claim and purchase another property at any location. The market value can be adjusted over time as the property increases or decreases in value. It is important to update your policy once every three years to make sure that the sums insured are a true reflection of the property value.
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