Articles from The Massachusetts Focus
Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Fall 2004, Volume 2, Number 4
by Donald Brown, Paralegal
In connection with the Premium Calculations example in the Paralegal Page from the Spring 2004 edition of The Massachusetts Focus, Volume 3, Number 2, regarding unusual premium calculations, this is a question and answer session to show how we increase coverage by way of an endorsement to the existing Policy.
Question: If I am handling a residential refinance transaction and the owner inquires about increasing the amount of their owner's coverage how would we do this?
Answer: The way we would actually submit and account for these situations are as follows:
Example 1. The first thing we would do is review the existing owner's policy to see what the policy says and, in particular, the amount of insurance. If the policy contained inflation protection, the owner's policy increases in coverage for the first five years by 10% of the original face amount of the policy. (So, if the policy was for $100,000, and five years have passed the amount of coverage provided would be $150,000.)
We would then calculate the new premium for the additional amount of insurance. In order to determine the amount of insurance you would review the loan amount of the new loan you are being asked to insure and the new appraisal of the property. These are reasonable things to base the new amount of insurance on. One thing we do have to remember in these cases is if you are treating the premium calculation as a simultaneous issuance, the amount of loan coverage cannot exceed the amount of the owner's coverage that you are increasing. That is, if the loan amount of coverage exceeds the owner's amount we would subtract the difference, and calculate the additional amount of loan coverage. (See Example 2 below.)
The next thing you would do is find what is called a change endorsement. You can find it on our company software Stewart Docs or on our local company website www.stewartma.com. On the website, click on Agent Support, go to the second set of tabs, click on Endorsements. There is a change endorsement here as well that you can use.
This is how we would fill out the change endorsement to the existing owner's policy: You plug in the serial number of the policy you are updating. Second, you would add the following language in the body on the endorsement: "Said Policy is hereby amended by adding the following: In Schedule A, the Amount of Insurance is increased from $100,000 to $150,000." You could also put a sentence in mentioning the loan policy that you are issuing in conjunction with this endorsement. Another example, if you were issuing this endorsement simultaneously with a new loan policy, would be to insert the language "Issued simultaneously with loan policy no.- ." When you are done with this process you would remit the endorsement along with the proper check to our Policy Accounting Department.
Example 2. If the loan amount was for $150,000, and the additional amount of owner's coverage was for $50,000, we could only do the simultaneous issuance change up to the $50,000, subtract $50,000 from $150,000.00, and the result would be 100,000. Loan premium would need to be charged for that amount.
In recently going online to the www.masslandrecords.com, I found that they have added six new Registries to their site: Berkshire, North, Middle, South, Franklin, and Hampshire counties. You can also get there by accessing the Massachusetts Secretary of State's website at www.state.ma.us/sec/index.htm.