4 Things To Know About Homeowner's Insurance When Making A Home Purchase
Are you preparing to buy a house? If so, there will be some things you will need to do before you can close on the house and take possession, and one of these things involves purchasing homeowner's insurance for the house you are buying. As you work through the steps of buying a house, here are three things you should know about the homeowner's insurance you will need for your new house.
1. You must buy a policy prior to closing
The most important thing to understand is that you need homeowner's insurance on the house you are buying before your mortgage closing appointment. Without one, you cannot proceed with the closing. This is always required unless a person is paying cash for a house, but even then, it is important to have home insurance on a house.
2. You should make sure you choose the right coverages
When you talk to the agent about your need for insurance, you should discuss all the different options you have with insurance coverage to make sure you get a policy that has the coverages you want and need. Most basic homeowner's policies offer the coverage types average people need, but you may need to add endorsements to the policy if you need extra coverage for things you own.
3. You may need to pay for an entire year in advance
In most cases, insurance companies will require that you pay for an entire year of homeowner's insurance coverage for a house upfront. This can be a costly expense, but you should be planning on this expense anyhow. If you do not have enough cash for this, you might be able to work the expense into your loan, but you should talk to your lender about this to find out if this is an option.
4. You will likely have to set up an escrow account
The other thing to understand is that after you purchase your first year of insurance, your mortgage lender will probably set up an escrow account for you. This will be an account that you must pay money into every month at the same time as when you pay your mortgage payment. The money you put into this account each month will later be used to pay for your homeowner's insurance bill when it comes due one year later, and it will also be there to pay for the property taxes on the house you are buying.
If you want to make sure you choose the right coverages for your policy, talk to a homeowner's insurance agent today.