10 Step Guide to Buying a House – Step 8
Step 8 – Get Insurance
The essential idea behind various forms of real estate insurance is to protect homeowners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime. If you have a mortgage on your home, homeowners insurance will be a requirement of your lender, but even if you pay cash for a home, homeowners insurance should be a consideration. You wouldn’t drive your car without car insurance, so why would you own a home without homeowners insurance.
What Kind of Insurance and How Much?
Various types of insurance are associated with homeownership including:
Title Insurance: Title insurance protects the owners in the event that the title to the property is found to be invalid. It is purchased with a 1 time fee at closing. Coverage includes lender policies which protect buyers up to the mortgage value of the property and owner coverage which protects owners up to the purchase price.
Homeowners Insurance: This insurance typically covers fire, theft and liability coverage and can cover a surprising number of items including in some cases property like wedding rings, furniture and home office equipment.
Flood Insurance: Generally required in high-risk, flood prone areas, this insurance is issued by the Federal government and can cover the home and contents.
Home Warranties: With new homes, buyers want to know that the builder will make repairs after completion. However, home warranties bought from third parties are designed to provide several forms of protection. On existing homes, home warranties are typically 1 year service agreements. Each warranty will have limitations and different levels of coverage, deductibles and costs. For details speak with your realtor, insurance brokers and home builders.
When Do You Get Insurance?
The time to obtain insurance is at closing, so you’ll need to make arrangements prior. Be sure to ask about limitations, costs and deductibles. Home warranties can be negotiated into the terms of an offer as well.