What Coverage Is Needed for Your Home Before Purchasing?
Purchasing a new home can be a very exciting experience. Whether you are a first-time buyer or an experienced homeowner it is usually a fun time. Attending open houses and viewing several homes on the market can give you the chance to figure out which features you like and which ones you don’t want in your new home. Looking for your perfect home and beginning the buying process can be thrilling, however, it can also be a bit overwhelming. Dealing with price negotiations, home inspections, and mortgage options might soon dominate the process.
One overlooked task that needs to be done before buying a home is purchasing insurance. When it comes to purchasing insurance for your home, it’s usually not optional. Most mortgage lenders mandate that borrowers have some level of homeowners insurance coverage before finalizing the deal on a home loan. With all that you might have going on during the buying process, using a home insurance compare tool might be helpful. Let’s take a look at the insurance products that you might need before purchasing your new home.
When you purchase your new home, a report of that transaction is typically filed as a public record. Similarly, records of other transactions such as liens or levies that may affect the ownership of a property are also archived. Your mortgage company will want to have assurances that their interest in your property is protected against these events. The two types of coverage for title insurance are a lender’s policy and an owner’s policy. Most lenders will mandate that you purchase an insurance policy to protect the mortgage company up to the amount of the loan. You will usually pay for the policy as part of the closing costs. It’s important to note that a lender’s policy will only protect the mortgage company. An owner’s policy would be needed to protect any financial investment you make.
As with title insurance, a homeowners insurance policy is required by most mortgage companies and banks. Homeowners insurance covers loss or property damage in the event of fire, theft, and liability. A homeowners insurance policy might also cover some personal belongings, such as furniture and jewelry. A typical home insurance policy covers the homeowner and the lender in the event of a loss. This means that both parties will have coverage with one policy. Homeowners insurance will be required throughout the life of your mortgage, but usually has to be purchased before the deal is finalized.
Private Mortgage Insurance
If you have a smaller down payment, you’ll usually need to get private mortgage Insurance. A lender usually requires this if you plan to put less than 20 percent down on your new home. This coverage protects the lender if you can no longer make mortgage payments. If you fail to make your payments and default on the loan, it covers a percentage of their loss. Usually, you’ll be required to have private mortgage insurance coverage until you’ve paid down a certain percentage of the loan.
Natural Disaster Insurance
Natural disasters such as floods, earthquakes, and tropical cyclones can severely damage or destroy your home. Property damage or loss of personal property might not be covered by standard homeowners insurance policies. Protection against loss due to natural disasters can be add-ons to your coverage or stand-alone policies. Flood insurance can be required if your home is in a flood-prone area. While flood insurance is typically the only coverage that can be required, you will want to consider your policy options and weigh them against the risks that are present in your area.
After you have selected the perfect home for you and your family you will begin the buying process that could require numerous steps. Securing the right insurance policies will be critical to ensuring a smooth closing. Since insurance products vary by coverages and cost, so you will want to shop around to make sure that you get the best rate for any required policies. With a little research, you could be on your way to successful homeownership.