First time home buyers have many expenses in addition to their down payment. From the home inspection to the appraisal, there are many out-of-pocket costs involved in buying a house. Homeowner's insurance is one of these unexpected expenses.
What is homeowner's insurance?
Homeowner's insurance is an insurance policy that covers personal residences. The policy guarantees to help cover the cost of repairing or rebuilding the home in case of fire, earthquake, tornado, storm, or other natural disaster damage. The policy also has a provision to protect you from liability should someone be injured while on your property.
While a homeowner's policy does protect against theft, it only covers up to a certain dollar amount. If you have valuable jewelry, furs, or art, you will want to add a rider to the policy. Insurance policy riders add additional coverage above and beyond the original policy amount.
Are you required to have homeowner's insurance?
When you buy a car, you are required to have proof of insurance before you drive it off the lot. When you buy a home, the same thing is true. Not only does it protect your investment in case of damage, but it protects you from being sued should a well-meaning neighbor slip and fall when stopping by to introduce themselves.
How early do you need to purchase homeowner's insurance when buying a house?
Most mortgage companies require that you bring a paid receipt for one year of homeowners insurance to the closing. While buying homeowner's insurance is relatively easy and can be done over the phone, it is best to start the process at least a week before the closing so you have time to price shop.
Can you pay for your homeowner's insurance separate from your mortgage?
Most mortgage companies require that your monthly payment includes principal, interest, taxes, and insurance, PITI for short. By collecting money in advance for your homeowner's insurance each month — called escrow — the mortgage company guarantees that the home will be covered by insurance the following year when the bill comes due again. They will use the escrowed funds to pay the bill for you.
How do you get the best price on your homeowner's insurance?
There are several ways to get the best price on your homeowner's insurance policy. You can start by calling several companies to see who offers the best rate in your area. Many insurance companies offer discounted rates to customers who carry multiple policies with them, like home and auto, so be sure to check with your existing insurance companies.
If your home has a security system, smoke and carbon monoxide detectors, a metal roof, and even a nearby fire station, you may be able to get a lower rate as well.
Buying a homeowner's insurance policy is one of the final steps in your home buying journey. It keeps your investment — your home — safe.
For more information, contact a company like Oliveira Insurance Agency.