A Homeowners Guide to Mail Scams and Savings

You’ve secured a loan, done inspections and completed escrow. Congratulations! You’re a new homeowner. But as you settle into your new digs, choose paint colors and arrange furniture, one thing you might not be expecting is the onslaught of solicitations that will soon flood your mailbox.

Home sale documentation is of public record as soon as the property title is transferred, making a new home owner the perfect target for direct marketers. And as the "important notices" start streaming in, it's challenging to decipher between what you might legitimately need, and what you can toss.

Here's MainStreet's guide to junk mailings and offers that can save you money:

Mortgage Protection Insurance
Also know as Mortgage Disability Insurance or Mortgage Life Insurance, these letters claim to cover your mortgage in the event you die or are unable to work. Some will quote your exact mortgage loan amount, making them seem even more legitimate. But experts agree new homeowners should resist the urge to buy mortgage insurance.

“These policies are usually overpriced, sometimes up to five times more expensive than term life insurance, and don't offer enough benefits,” says Randy Kivett, a financial planner based in Tacoma, Wash.  “If your family is dependent on your income, I recommend you purchase some sort of life low-cost life insurance or long term disability insurance that covers a broader use of your funds, than being relegated to only covering your mortgage.”

Important Note: Don’t confuse the above terminology with Private Mortgage Insurance (PMI), which lenders require when a down payment is less than 20%. PMI protects the lender only in the event you default on the loan and is added to your monthly mortgage payment. Once 20% of the home value is invested, the lender is required to drop the extra charge.

Earthquake Insurance
Earthquake insurance isn’t included in your homeowner’s insurance, and new homeowners are reminded of this lack of coverage through mailings from insurers. If you're considering earthquake insurance, be prepared for sticker shock. Most policies have a high deductible (10-15%) with low contents coverage, which explains why only 12% of California homeowners have earthquake insurance. (In California, most earthquake policies are sold through the California Earthquake Authority, and don't cover things like swimming pools, where earthquake damage can be costly.)