Home Insurance for Homeowners
Don’t wait until the last minute to start shopping around for the insurance you’ll need to protect your home. If you do, you’ll have little opportunity to shop for the best deal. So start your search as soon as you apply for your mortgage. The insurance industry is competitive with salespeople anxious for your business. Getting multiple quotes either online or in person can save you hundreds of dollars. Before choosing an insurer, consider the insurer’s reputation and always make sure you are comparing similar policy coverage.
Buying insurance can be confusing. If you need assistance from someone other than an insurance salesperson, contact the stage agency in charge of regulating insurance.
What follows is a summary of the types of insurance you may need to purchase:
Homeowner’s Insurance
Homeowner’s insurance, also called hazard insurance or fire insurance, protects a lender’s investment against loss. It’s the lender’s assurance that damage to the property will be repaired or replaced, up to the coverage amount purchased. That’s why lenders require proof of it before they’ll approve your loan application. If the insurance coverage you have purchased does not meet the lender’s requirements, your loan may be denied. State laws regarding acceptable coverage amounts vary, so definitely check with your lender before shopping for coverage. The amount of coverage you need likely will be the greater of the home’s value or your loan balance.
Flood Insurance
Something that homeowner’s insurance does not cover is damage caused by a flood. If the property you intend to purchase is located within a designated flood zone, obtaining flood insurance will be a condition of loan approval. FEMA, the Federal Emergency Management Agency, publishes maps showing SFHAs or Special Flood Hazard Areas and these maps are usually available for review at the local town hall or appropriate county building. If not, SFHA maps for the area in question can be ordered by calling or faxing the local FEMA branch office.
But even if your home is not in a SFHA, it still may be at risk. That’s why FEMA also administers the National Flood Insurance Program or NFIP. This is a program set up by Congress for the purpose of assisting property owners interested in purchasing insurance to protect against flood-related losses.
How much you’ll pay for flood insurance depends on several factors. Among them are the property’s location and if in a SFHA, its elevation, building occupancy, age and design of the building, and of course, the amount of coverage desired.
Title Insurance
Although a title search is part of the mortgage approval process, sometimes problems are missed. Title insurance protects you and/or the lender in the event a tax lien or unpaid mortgage or judgment was not discovered during this process. With this type of insurance, the title insurer is responsible for paying any damages that arise from future claims made on the property.
Most lenders don’t require you to purchase title insurance. It’s optional and if you’re interested, purchase a buyer’s title policy. You pay only once for this type of insurance and you can purchase it from either the company that conducted your title search or any other company offering title insurance. If the seller already has title insurance, consider contacting the seller’s insurer and inquiring about a reissue rate. You may get a lower price this way.
Other Insurance
As a convenience rather than a requirement, many lenders also sell health and life insurance policies. While these aren’t required to obtain a mortgage, they can ease your mortgage burden
should the unexpected happen.