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I am the author of this blog and also a top-producing Loan Officer and CEO of InstaMortgage Inc, the fastest-growing mortgage company in America. All the advice is based on my experience of helping thousands of homebuyers and homeowners. We are a mortgage company and will help you with all your mortgage needs. Unlike lead generation websites, we do not sell your information to multiple lenders or third-party companies.
Most lenders will require that you have homeowners insurance in place before the closing. This is also be called hazard insurance because it covers natural disasters like fire and storms, and theft.
Why do you need insurance for a house?
The lender won’t fund the loan on a property that isn’t insured, and the lender will often require certain types of insurance and at a specific financial level (usually at least the amount of cost of replacement) to make sure they won’t lose their money in the event of a disaster.
Depending on the geographic area you may need to carry specific types of insurance, like earthquake or flood insurance.
Types of Coverage:
Most insurance policies have several sections, each one covering a different aspect of home ownership:
- Dwelling Insurance: pays for damages to the structure of the home, outbuildings, detached garages, etc.
- Personal Property: covers household items, including furniture, clothing, appliances and electronics which are damaged or stolen. After an event many people find that they have a lot more stuff than is covered in their policy, so it is advisable to do an inventory and videotape your possessions.
- Liability Insurance: protects you against financial loss if you are found legally responsible for someone else’s injury or property damage.
- Medical payments: pays the medical bills for anyone injured on your property and some injuries away from the property. For example, if your dog bites someone.
- Loss of Use: covers living expenses if your property is destroyed or too damaged to live in while being repaired.
- Flood Insurance: many lenders and some states require a specific policy for flood insurance.
Download free ebook – How To Buy Your First Home
Homeowner’s Insurance: Put the Right Policy in Place
Experts agree that the most important question homeowners should ask when shopping for a plan is the A.M. Best rating of each company. New companies pop up all the time, and homeowners need to be informed about what a company can offer in terms of protection against potential risk.
Consumers should also become familiar with the liability portion of their policy. ACV (Actual Cash Value) policies pay claims based upon the depreciated value of the item or items lost. However, replacement cost policies will pay the full cost required to actually replace the items.
To ensure that the right amount of insurance is purchased, homeowners should obtain an appraisal every five years or so. If additions are made or remodeling takes place, homeowners will need to revisit and possibly upgrade their plan as well.
Experts say there are several important mistakes homeowners should be especially careful to avoid. The first is being dishonest on an application. This is absolute grounds to reject any claim. Secondly, if the property contains a detached structure – such as a guest house, a barn, a workshop, or a garage – be sure to include each one on the insurance policy. Finally, do not over-insure. Homeowners can save a little money by insuring only those items and structures that need to be replaced.
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You may also like to download free ebook- How to buy your first home.