When I purchased my first home, there were a lot of things I was confused about. There was so much paperwork to fill out, documents to provide, and things to do that I was a little overwhelmed at times. Thankfully, I had a good realtor, loan officer, and insurance agent who did most of the heavy lifting for me. But for those of you who are thinking about buying your first home, let me clarify at least one part of the process - purchasing homeowner's insurance. Below are answers to some of the questions I had when I was obtaining homeowner's insurance for my first home.
Do I need homeowner's insurance?
If you purchase a home on credit, the bank will require you to have homeowner's insurance. Even if you purchase a home with cash, it's a good idea to protect your investment.
Who should I use?
There are many companies that provide homeowner's insurance. Many first time homebuyers get their homeowner's insurance from their auto insurer. This can provide multi-policy discounts and is occasionally the way to go. I would recommend using this opportunity to shop around to make sure you are getting the best price for similar coverages. With homeowner's insurance it's important to shop around because the price difference between companies is dramatic at times. There are many occasions when the savings of going with a different company are more than the savings of a multi-policy discount. Many loan officers know insurance agencies that provide excellent service and have superior pricing. Get a quote from your auto insurer, the company your loan officer recommends, and maybe one from your friend's company. Most policies are very similar in what they cover so make sure you are getting the most for your dollar.
How do I obtain it?
If you are purchasing the home on credit you will be required to show proof of insurance at the close of escrow. Obtaining proof of insurance, also known as a binder, can be done weeks in advance. There are loan officers that will do all the quoting and binding for you or you can handle it yourself. When it comes to binding the policy, it's usually easiest to let your loan officer work with the insurance agency. Information needed to bind the policy, such as your name as it will appear on the deed, estimated closing date, mortgagee clause, and escrow account information, is more readily available to the loan officer. You usually do not have to sign anything for a homeowner's insurance policy and you can have it paid through escrow.
What does it cover?
You'll want to read your individual policy to understand exactly what your policy covers. Generally speaking a basic H03 policy would cover things like fire, wind, theft, and personal liability - among other things. It usually does not cover things like equipment breakdown (some companies have this as an optional coverage) and general wear and tear of the home. It also does not cover flood or earthquake as those coverages need to be purchased as separate policies. Obviously, this is not a comprehensive list of all things covered and not covered by a homeowner's insurance policy, but just a few examples of things covered and not covered.
Purchasing your first home can be overwhelming at times. With so many things to do and so little time, it's difficult to be informed every step of the process. While purchasing that first home can be stressful, hopefully these couple of tips on homeowner's insurance will ease your burden at least a little.
Do I need homeowner's insurance?
If you purchase a home on credit, the bank will require you to have homeowner's insurance. Even if you purchase a home with cash, it's a good idea to protect your investment.
Who should I use?
There are many companies that provide homeowner's insurance. Many first time homebuyers get their homeowner's insurance from their auto insurer. This can provide multi-policy discounts and is occasionally the way to go. I would recommend using this opportunity to shop around to make sure you are getting the best price for similar coverages. With homeowner's insurance it's important to shop around because the price difference between companies is dramatic at times. There are many occasions when the savings of going with a different company are more than the savings of a multi-policy discount. Many loan officers know insurance agencies that provide excellent service and have superior pricing. Get a quote from your auto insurer, the company your loan officer recommends, and maybe one from your friend's company. Most policies are very similar in what they cover so make sure you are getting the most for your dollar.
How do I obtain it?
If you are purchasing the home on credit you will be required to show proof of insurance at the close of escrow. Obtaining proof of insurance, also known as a binder, can be done weeks in advance. There are loan officers that will do all the quoting and binding for you or you can handle it yourself. When it comes to binding the policy, it's usually easiest to let your loan officer work with the insurance agency. Information needed to bind the policy, such as your name as it will appear on the deed, estimated closing date, mortgagee clause, and escrow account information, is more readily available to the loan officer. You usually do not have to sign anything for a homeowner's insurance policy and you can have it paid through escrow.
What does it cover?
You'll want to read your individual policy to understand exactly what your policy covers. Generally speaking a basic H03 policy would cover things like fire, wind, theft, and personal liability - among other things. It usually does not cover things like equipment breakdown (some companies have this as an optional coverage) and general wear and tear of the home. It also does not cover flood or earthquake as those coverages need to be purchased as separate policies. Obviously, this is not a comprehensive list of all things covered and not covered by a homeowner's insurance policy, but just a few examples of things covered and not covered.
Purchasing your first home can be overwhelming at times. With so many things to do and so little time, it's difficult to be informed every step of the process. While purchasing that first home can be stressful, hopefully these couple of tips on homeowner's insurance will ease your burden at least a little.