Insurance Inquiry After Death

[tatbense]

What is the name of your state? Kansas

My father died and left behind a house that needs A LOT of help and only has about $24,000 remaining owned on it. I would like to inquire if he had insurance coverage on the house which would pay it off upon his death. He once mentioned this but I do not find any record of it in his home. Also, my attorney advised me to just keep the payment up and not notify the mortgage company of his death lest they wish to change finance terms or something along those lines. I have never owned a home and know little about what type of terminology or paperwork to look for.

What is that type of home payoff upon death insurance CALLED? What's the industry term for it?

How would I go about seeing if he had any on his home?

And, is my attorney right... should I not notify the mortgage company of his death until the estate has went through probate and assets have been distributed?

 

[seniorjudge]

It may be possible that he had insurance to pay it off through the lender. Look at his check book and look at the premium payment info.

If you want to follow your lawyer's advice, then you will just have to root around in all your dad's papers till you find something about insurance (especially life insurance).

 

[efflandt]

It is usually called "credit life insurance", which only pays the balance owned, and is usually more expensive for the coverage provided than regular term life insurance. It is common for dealers to try to sneek that into payments for car loans, and credit card companies for credit card payments, but not sure how common that is for mortgages. You would have to look over his mortgage papers.

 

[moburkes]

It is usually called "credit life insurance", which only pays the balance owned, and is usually more expensive for the coverage provided than regular term life insurance. It is common for dealers to try to sneek that into payments for car loans, and credit card companies for credit card payments, but not sure how common that is for mortgages. You would have to look over his mortgage papers.

For mortgages they call it mortgage protection. Its just a fancy way of saying life insurance for the $ amount of the mortgage. Although the payments stay the same throughout the term of the loan, the amount of coverage decreases as the balance on the mortgage decreases.

Good luck finding the policy. SJ was correct in leading to locate either a policy or a checkbook or a bank statement.

 

[alnorth]

As an unrelated aside, this type of insurance is usually not the best financial move you can make. These mortgage protection life policies are typically loaded up to the hilt, and you could get more coverage with the same amount of money with a couple policies: a term life policy, along with a small disability policy to mirror the disability waiver in the mortgage protection policy.

 

[tatbense]

An update...

Ok. I have looked everywhere and looked through all my dad's old check registers and nothing really jumps out at me. I cannot locate a copy of his homeowner's policy other than one from years and years ago when he was married and first purchased the property. He since has moved to another mortgage lender, which then subsuquently sold to a third lender. What a confusing tangle.

What I DID find is the following from the Form 1098 that his mortgage company sent him for tax purposes this Janurary... I will do my best to transcribe the info here below leaving out amounts and policy numbers:

Disbursement Activity
Real Estate Taxes Paid $XXXX.XX
Hazard Insurance Paid $XXX.XX

Payment Distribution
Principal and Interest $XXX.XX
Escrow Payment $XXX.XX
Portion of Payment Secured by Collateral $XXX.XX
Portion of Payment Not Secured by Collateral $.00
Total Payment $XXX.XX

Principal Activity
Beginning Bal $XXXXX.XX
Amount Paid $XXX.XX
Ending Balance $XXXXX.XX

Miscellaneous
Optional Insurance $.00
Late Charges Paid $.00
Late Charges Due But Unpaid $.00
Fees Paid $.00
Fees Due But Unpaid $.00

Escrow Activity
Beginning Bal $XXXX.XX
Deposits $XXXX.XX
Disbursements -$XXXX.XX
Escrow Interest $.00
Ending Balance $XXX.XX

-

So, my question is... would insurance like I describe above all under the "Optional Insurance" cateogory with his mortgage company? Or would this be something paid through a separate company altogether.

Also, while we're at it and because I'm so clueless on homeownership terms and such... What is the purpose and meaning of the escrow account on his home owners policy? And why would there at times be a remaining balance? This is very confusing to me.

 

[moburkes]

Well, he didn't buy the mortgage protection through his mortgage company. He could have purchased it separately.

An escrow account is used to make monthly payments to the mortgage company for taxes and insurance. For many people it is easier to divide their taxes and insurance into 12 monthly installments, and then have the mortgage company pay the bill once a year (or twice for taxes) instead of saving it up in your own savings account, and then being short when it comes time to pay those two bills. Some mortgage companies require the escrow, while others don't require it, but will offer it as a service for you. It would then be collected/paid when you pay your regular mortgage payment.

There is a balance in escrow between payouts to the insurance company/city. Let's say your taxes are $1200/year, so you pay $100/month into escrow. There is always an overage in the account in case the taxes or insurance go up before the account can be re-assessed each year. So, after 12 months of paying $100, when it is time to pay your taxes, the money is all there, and the escrow company (usually the mortgage company) can simply write a check, and subtract that check from your balance.