New Homebuyers’ Guide to Home Insurance
New home buyers have a wide range of factors to consider when shopping for real estate. You’ll likely need homeowners insurance for a mortgage lender to issue you a home loan in terms of the insurance. Here are important points to be aware of when it’s time to purchase home insurance.
Mortgage lenders generally require home insurance
Banks don’t just loan out large sums of money to anyone. Your mortgage lender wants to make sure you carry homeowners insurance as a safety net for its investment. Typically, this insurance is included in an escrow account, in which the lender collects money for homeowners insurance and makes payments for you.
The lender might require a mortgage escrow account if your down payment on the home is less than 20 percent. In some cases, a lender might charge a higher interest rate or demand full annual payment for home insurance rather than require an escrow account.
Navigating the process of purchasing home insurance
Shopping for home insurance can be complex since different insurance agencies design their own policies. It’s best to start with a standard homeowners policy, which includes various liabilities, then add other coverages. Here are some of the different options you can find for home insurance coverage:
- Dwelling – This coverage pays for a new structure if it’s damaged in a disaster other than stated exclusions.
- Personal Belongings – If any personal belongings are destroyed in a fire, flood, or other disaster, this coverage pays to replace them.
- Bodily Injury – Any home has risks, such as tripping over steps. If someone is injured at your home, this coverage pays for their medical bills.
- Liability Insurance: This covers any medical expenses and property damage caused by your household members to other people
- Property Damage – If you or someone in your household causes damage to someone else’s property, this coverage pays to repair or replace the damage. An example is if your kid throws a ball that breaks your neighbor’s window.
- Additional Living Expenses – If a disaster occurs that forces you out of your home, this coverage pays for lodging and other living expenses.
The process for evaluating a home insurance policy
Once you decide on a home to buy, look right away into getting home insurance. In your search for insurers, compare various factors beyond just rates. Find the plan that gives you the most financial protection for your needs. It’s also important to find out about the history and financial stability of the agency. Check online reviews to gauge how the firm handles claims.
A study by J.D. Power in 2020 found that homeowners give high scores to home insurance companies. The study found that the two most common reasons consumers change insurers are premium hikes and cumbersome claims processes. So, find out if the company gets complaints about these issues.
Be aware that a home insurance policy is very specific about what it covers and may not cover everything you assume it does. That’s why you should thoroughly discuss the policy with an insurance expert who can provide you with greater clarity. Share your personal inventory list to make sure your policy covers all your valuable items.
Part of buying a home involves choosing home insurance that works for your mortgage plan and your financial situation. Contact us at Little & Sons Insurance Services if you would like to know more about how we can help you get appropriate home insurance for your needs.