When buying a house you need to consider all of the expenses that go along with the closing. In addition to the realtor’s commission, there will be insurance related closing costs. Not only will there be an expense for title insurance and possibly private mortgage insurance, you will need to find a homeowners insurance policy to protect your new property from damage.
Before you buy a home, if you are borrowing money from a lender, you will need to have homeowners insurance in place. This type of policy will protect your property from theft, fire, flood and other disasters. You will also need to determine how much coverage you need for your situation. If you have a garage or a pool, you will want to make sure your house insurance reflects this. If you are installing high end upgrades into the home, such as hardwood floors, stainless steel appliances and flat screen televisions, your policy will need to take this into consideration also. When buying a home, you are not only insuring the personal property inside the house, you are also insuring the building and considering how much it would cost to replace or rebuild the home in the event of a disaster.
There are several types of insurance related closing costs when buying a house. You will want to compare quotes online for the best rates for the coverage you need and make sure the insurance is in place before you close on the home. The last thing you want is for such a large investment to be destroyed and have no way to recoup your loses. Although you do not expect disasters to happen, they can occur without warning. Check out the rates with several companies for affordable house insurance before making a final decision.
Any financial loss occuring due to theft, fire, windstorms and other such perils listed under your policy needs home insurance to protect your home. In order to cover your home, it’s belongings and personal property, be a tenant, land lord or home owner needs a home insurance. Every person needs protection against liability, if any accidents occur, some one is injured or any property damage.
- Homeowners: Shielding both home and personal property
- Tenants: Protecting only your personal belongings and not the building.
- Other parties: Protection against liability for injuries caused to people or accidents occurring within the property premises
The better the policy is designed with required coverages, less you will be paying out of your own pocket to cover the disasters. When your house is under mortgage then your lender might ask you to have more coverages than required. It is always better to check with your agent or the insurance company and then decide on coverages and amount required to cover your home, content and personal belongings.
How Much Coverage Do You Need?
- Covering your property and belongings: To cover personal property, valuables and other belongings with better coverages without burning a hole in your pocket.
- Self protection: Gives enough liability coverage to protect against legal actions resulting due to your negligence or other hazards that might occur on your property.
- Lender requirements: Your mortgage lender will ask you to cover the house for replacement cost of dwelling or mortgage amount.
- Policy requirements: The insurance company might impose coverage requirements for replacement cost of your house. Most of the plans will actually limit at 100% of replacement cost. However, few standard plans limit to 80% of it.
Sometimes when you’re buying homeowners insurance, it pays to think outside the box. Or, in this case, outside of the flood zone. Although standard homeowners insurance companies don’t offer flood insurance, your mortgage company will put up a serious fuss if you live within a flood zone and don’t buy it. They’ll actually do more than put up a fuss, but that’s another discussion entirely. Alas, even if you don’t need flood insurance, you might want to consider getting it.
Why on earth would anyone do that? Lots of reasons. Here are a few:
• Just because you don’t live in a flood zone doesn’t mean you’ll never experience a flood. And if that happens and you’re not covered, you’re out of luck.
• There have been billions paid out in flood insurance claims over the course of the last 30 years to homeowners who don’t live in flood-prone regions. This is clear indication that flooding happens a lot, even for homes that aren’t in high risk areas.
• Developments in and around your neighborhood could raise your flooding risk. Are you putting in a pool or do you have a neighbor who’s doing so? This is just one of many scenarios that can increase your home’s flood risk.
When comparing online home insurance quotes, allow for an extra $370 per year to cover for flood insurance through the National Flood Insurance Program. The average cost boils down to about $1 per day but could be more or less, depending on your location. If you’re not sure how to go about obtaining flood insurance, contact your home insurance provider. They’ll be able to point you in the right direction.
Some people believe that they no longer need home insurance in the state of California once their home is paid off. After all, if the mortgage balance has been satisfied in full, there is no way that they will have to fork over a large sum of money again, right? That is actually an erroneous assumption, and here are some reasons why even those with paid-off homes still need California home insurance:
- Disaster Protection — A home might be paid off, but it is still susceptible to damage from earthquakes or other natural disasters. The cost to repair or replace a home that has been hit by such events is tremendous, far beyond what most people have accessible in their savings accounts. A California home insurance policy will pay the homeowner what it will cost to fix the home up to the policy limit.
- Personal Liability — It is all too easy to get sued in today’s world, and homeowners are in a lot of trouble when they lose a personal liability case because the court-ordered payout to the plaintiff could cost well into the hundreds of thousands. A good homeowners insurance policy will pay for these damages, whether it is Los Angeles homeowners insurance for Los Angeles’ residents, San Francisco homeowners insurance for residents of San Francisco, or home insurance for those who live in other California cities.
- Theft Protection — Finally, homeowners who have paid off their mortgage may still suffer the loss of their possessions through burglary or other forms of theft. Quality California home insurance policies include contents insurance that pays the replacement costs for stolen merchandise according to the policy limits.
For first-time homeowners, it may be intimidating to find information on homeowners insurance and comparing coverage rates. This is to help assist you to overcome that anxiety.
To assist in making a personal decision about insurance coverage for your home, you need to understand the basics. The following two terms are essential elements to come to terms with and grasp in order to make an educated decision.
- Homeowners insurance: A policy taken out on your residence. Usually, the policy covers all or a portion of the repair or replacement costs if your home is damaged or destroyed. But, just like car insurance, you can have “riders” added to your policy. These include such things as medical coverage (this is optional on some homeowners insurance policies), coverage for unattached buildings or structures (tool sheds, barns, or similar buildings), and other things.
- Premium: The amount you pay for your homeowners insurance policy. How much that figure is depends on the amount of coverage you purchase. How much coverage you need depends on a number of things. For example, if you still have a mortgage on your home, your mortgage company may require you to carry a certain amount of coverage. If your home is paid off, and is an older home, you may be able to get by with less coverage.
If you’re considering dropping your homeowners insurance coverage to save money, think again. Doing so is a bad idea on many levels, the least of which could be financial ruin if your home experiences damage beyond your ability to repair it. Although you’re not required to have homeowners insurance by law, your mortgage company requires you to maintain a certain level of coverage in order to stay within the terms of your loan.
What happens if I let my homeowners insurance lapse?
Don’t think that you can quietly let your home insurance coverage lapse by conveniently neglecting to make payment by the designated due date or by the outright cancelation of your policy. Issues this big rarely get ignored. The first thing that’ll happen—after you receive a friendly letter or phone call from your insurance company letting you know that your coverage has been canceled—is that the insurance company will contact your mortgage lender to give them a courtesy “heads up.” Soon thereafter, expect to be contacted by your mortgage lender instructing you to buy home insurance posthaste. If you don’t, they’ll purchase a policy for you and bill you for it with your mortgage payment.
What’s the worst case scenario?
It can get a lot worse than having your mortgage company simply buy insurance coverage for you and slap the premiums (which you can expect to be far more expensive than what you were paying before) onto your monthly mortgage bill. In some cases, the mortgage company could see this as a violation of the terms of your loan and may take legal action against you to recover the full amount of the money loaned.
One of the chief requirements of closing the deal on a home mortgage is buying a home insurance policy. New home insurance doesn’t only benefit you, after all. The bank who’s financing your mortgage has a substantial stake in your home too, and taking measures to ensure that investment is is protected is one of their primary concerns.
What happens if I don’t get home insurance?
When it comes time to finalizing paperwork for your mortgage, the bank or lender will require you to provide proof that you’ve taken steps to insure your new home. In the event that you don’t secure new home insurance through the insurer of your choice, your mortgage company may do one of two things: hold up on closing until you’ve obtained an adequate insurance policy, or provide you with a policy of their own.
Is lender provided home insurance better?
In a word, no. The coverage you’ll get from a lender-provided home insurance policy will only differ from a policy you obtain on your own in out-of-pocket costs to you. Typically, the home insurance coverage that your mortgage company will purchase for you is far more costly than what you’ll be able to get on your own. Premiums are added to your monthly mortgage payment and could significantly raise the total amount of money you pay.