Can an existing life insurance policy be used toprovide for the repayment of an outstanding mortgage loan?
[Note: this answer is based on the Insurance ServicesOffice’s HO-3 policy.] Coverages A and B provide protection to the dwelling and other structures on the premises on an “all risks” basis up to the policy limits. The policy limit for Coverage A is set by the policyowner at the time the insurance is purchased. The policy limit for Coverage B is usually equal to 10% of the policy limit on Coverage A. Coverage C covers losses to the insured’s personal property on a named perils basis. The policy limit on Coverage C is equal to 50% of the policy limit on Coverage A. Coverage D covers the additional expenses that the policyowner may incur when the residence cannot be used because of an insured loss. The policy limit for Coverage D is equal to 20% of the policy limit on Coverage A. The coverage limit on Coverage E – Personal Liability – is determined by the policyowner at the time the policy is issued. The coverage limit on Coverage F – Medical Payments to Others – is usually set at $1,000
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