What is that “necessary evil” that we all pay for but are not sure why? That’s right; It is Home Owner’s Insurance! Much like the homes in the video above, Mother Nature has a way of wreaking havoc on homes during epic storms. Additionally, we have all been that person stuck to the TV watching the devastation that a huge hurricane is doing to the coastline. We all have friends that talk about the fear after their home is broken into. Personal belongings are gone in the blink of an eye. Each of these losses could cost you, as the homeowner, hundreds of dollars or even millions. The typical family is not ready financially when big losses like these occur. Therefore, while sometimes expensive, we pay Home Owner’s Insurance premiums every month to protect ourselves.
Homeowners insurance is a safety precaution a homeowner pays in case of a loss or damage to your home. It is often referred to as “hazard insurance.” The insurance company assumes the risk of a loss and the homeowner has peace of mind that they will not be entirely financially responsible if happens to their home.
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Is Homeowners Insurance required When Purchasing a Home?
In order to obtain financing to purchase a home, a mortgage company will REQUIRE you to have Homeowners Insurance. Mortgage companies have a very high financial interest in your home, therefore, they want to make sure their interest is protected. They do this by requiring every person purchasing a home, town-home, condo etc. to purchase a Homeowner’s Insurance policy. Normally, homeowners pay for this insurance through an escrow account set up by your mortgage lender. This payment is included in your monthly mortgage payment. The mortgage company takes money out of the escrow account and pays the insurance company directly, on your behalf. Again, this simply ensures the interest of the mortgage company is protected.
If you do not have Homeowner’s insurance at the time of closing on your home, the mortgage company is legally allowed to purchase it on your behalf. These policies tend to be much more expensive than if you purchase through your local insurance company. Your C4 Elite Real Estate agent can direct you to an insurance company if needed.
Also, if you are currently renting, in most cases you can call the company that is managing your renter’s policy. Once given the information about the home you are purchasing, they can quote you a rate. At closing, they will convert your rental policy into a Homeowner’s policy. It is important to do your own research and find the right insurance company that fits your needs and budget. Always remember, you pay for what you get. If your monthly premium is lower than other insurance quotes, it could be due to less coverage. As with all scenarios when purchasing a home, ask Questions!!
Different Types Of Homeowner’s Insurance
The standard policy will cover the home structure, attached structures to your property, personal property and liability. Some companies also cover loss of use, medical payments and wage loss. It is important to note that most insurance companies do NOT provide coverage for flooding. A separate policy needs to be purchased for damage from floods to be covered. It is crucial to determine if your home is in a flood zone. Make sure to investigate that during your due diligence period. If you determine your new home is in a flood zone, visit Floodsmart.gov to obtain information on how and where to purchase a flood policy. Further, there are also different types of policies for each type of home you may purchase. For example, condos and manufactured homes have separate policies that provide coverage for different things.
What is the Difference Between a Home Warranty and Homeowner’s Insurance?
A home warranty can be purchased at the time of closing, but it is NOT required by the lender. Home warranties cover losses to the main components of your home and appliances such as; plumbing, heating and cooling, electrical, kitchen appliances and washer/dryer. The home warranty will cover the repair or replacement of said items due to age and normal wear/tear. That last sentence is very important because that is the main difference between the home warranty and Homeowners Insurance. Homeowner’s Insurance DOES NOT cover damage caused by age and normal wear/tear. If it is within your budget, it is highly recommended to purchase a home warranty in order to fully protect your home and personal belongings for all types of losses.
How Much Does Homeowner’s Insurance Cost?
Unfortunately, we cannot provide you with an average price for insurance as it varies greatly. There are many factors that go into determining a monthly premium. Such as, the cost of the home, where its located, is it in a flood zone, how far from a fire station is it and many more factors. Some insurance companies offer several different kinds of additional coverage as well. Due to a prevalent amount of fraud in our society, and the advancement of technology, many insurance companies now offer identity theft protection. Keep in Mind! Your monthly premium is all dependent upon how much coverage you want and need.
Homeowner’s Insurance Tip of the Day
After you are all settled into your beautiful, new home, do yourself a big favor and go through each individual room with a video camera. Film all your personal property in each room and inventory what you have. Provide a copy of this video to your insurance agent for safe keeping. We never expect a large loss to happen to our home, but when it occurs, the last thing you want to do is try and remember each individual piece of property you own. The video will help the insurance company determine value of and confirm ownership of your personal belongings. This is also very helpful in the event paper receipts you are keeping are destroyed.
Homeowner’s Insurance Is VERY Important
I hope you take away one thing from this article. The importance of having Homeowners Insurance. It is there to protect you and your family in case you suffer a devastating loss. Also, while less devastating than a flood or fire, if your teenager accidentally runs your car into the wall of the garage, you will have protection. Please also make sure you do your own research as each insurance provider offers different types of coverage as well as different rates and prices.
Contact C4 Elite Real Estate when you have questions or need assistance buying/selling a home.