You’re buying a house! Congratulations. Whether you’re a seasoned home buyer or a first timer, you may not know the basics to home insurance. Here is a quick schooling to make sure you’re up to date on what home insurance covers, how to choose an insurance provider and how home insurance ties into your property buying experience.
What does home insurance cover?
-Home insurance most commonly protects against fire, lightning, tornado, hurricane, wind, hail, theft, vandalism, ice, falling objects, sudden water and sudden smoke.
-Foundation, water back up and mold coverage may automatically be included or available as endorsements
-Flood (water originating outside the home) is a separate policy that may or may not be required depending on if your property is in a flood zone.
-Most insurance companies break down home insurance policies into coverages A-F with additional endorsements.
Coverage A (Dwelling) is dwelling coverage for your actual home
Coverage B (Other Structures) is for other structures on the property
Coverage C (Personal Property) protects all your contents and personal belongings
Coverage D (Loss of Use) is temporary living expenses while your home is unlivable (covers hotel and meals, etc)
Coverage E (Liability) protects you against claims and lawsuits
Coverage F (Medical Payments) pays for injury to others on your property
What insurance company should you go with?
If you’re starting from scratch then ask your realtor, friends or family for a recommendation or research online reviews. If you’ve never heard of a company and their rate sounds too good to be true then it might be. Quality is as important as price and a cheap policy might lead to a cheap claims experience and cheap service.
Even if you’ve had the same insurance provider for 20 years you should get a couple back up quotes from other providers. Every insurance company has different underwriting procedures and you don’t want to find out two days before closing that your insurance company cannot insure the new house you’re purchasing because of its current condition, driving distance to the nearest fire station or a variety of other reasons.
How does home insurance tie into your closing requirements?
All homes purchased through a mortgage loan require home insurance to protect the mortgagee’s interest in the property. Proof of insurance is required by the mortgage lender before your closing date. Choosing an insurance provider and getting them in touch with your mortgage lender as soon as possible will help make sure you close on time and without issues. In most mortgage situations home insurance payments are absorbed into the mortgage payments. This is known as Escrow and in these situations the insurance company will invoice the mortgage company directly.