house policy/letter of indemnity

john_reilly74

was about to buy household insurance based on a quote and got an unsettling feeling when the rep asked me if i had a mortgage and who it was with. i goes why do you need to know that? and the answer i got back was oh the banks always request it and issue a letter of indemnity. i goes what bank will request -my mortgage provider? and she starts babbling and repeating the same thing which i wasn't happy about and didn't go ahead the purchase.

Is it correct that insurers need to know if your house is financed by mortgage or if you own it outright? And can anyone explain what is this letter of indemnity she mentioned?

Thanks

thrilledskinny

I'm no genius on this, but yes what she is saying is normal. Changed my house hold insurer this month as it was due to expire and i got a lower quote because my house value like most peoples has gone down drastically!
And yes you need to let your mortgage bank know who is insuring your house, the letter of endemnity is usually included in the insurance policy papers you get, ask insurer they'll tell you which it one it is, its addressed to your mortgage bank, it just states such and such a company is insuring your house.
Hope this helps,dont hesistate to ask your bank or insurer, they should ans your questions..

phormium

Perfectly normal.

oldyouth

A letter of indemnity (among other things) places an obligation on the insurer to issue claim cheques for damage to the property to be made out in the joint names of the policyholder (you) and them as the mortgage provider. Usually, it states that the amount must be over €1,300. Because they have advanced money to you to purchase your home, they have a financial interest in it. If it is damaged by an insured event, they will want to ensure that any claim monies received are used for the sole purpose of reinstating the house to good condition. This clause does not apply to contents insurance

It also places an obligation on the insurer to notify them is the policy is lapsed or cancelled.

It is all perfectly normal and would have been part of your mortgage agreement.

coylemj

+1 At it's most basic it's to stop you from burning down the house, making it look like an accident and skipping off to Oz with the money, leaving the mortgage behind.

The mortgage provider is entitled to protect their interest in the property and the way they do this is to make sure that their interest is noted on your fire insurance policy. If the house then burns down, the bank's 'interest' i.e. the outstanding debt has first call on the insurance money since holding a mortgage on your property makes the lender the first in the queue.