When to Get Homeowners Insurance When Buying a House

Buying a new house is exciting, whether you’re a first-time buyer or an experienced homeowner. Going through open houses or viewing homes for sale with a real estate agent offers the chance to see what features you do and do not want in your new home. While finding your perfect new home and starting the buying process is thrilling, it can also be stressful. Worrying about price negotiations, home inspection and mortgage terms can dampen the excitement of buying a house.

Often overlooked in the long list of things to do before buying and moving into your new home is buying homeowners insurance. Getting homeowners insurance before closing is an important step in the homebuying process and should be a priority.

Getting Homeowners Insurance Before Closing

In most cases, lenders mandate buying homeowners insurance before the loan closes and maintaining coverage for the life of the loan. By securing the coverage you need before you even move into your new home, you safeguard your purchase from disaster for yourself and the lender. It’s important to research various insurance policy options as they may offer different levels of coverage. And different homes may have different coverage needs. For instance, if your home is in or near a flood plain, you may be required to add flood insurance coverage to your policy. Even if the lender doesn’t require buying homeowners insurance with flood coverage, you might consider it. Some homes are located where earthquake insurance would be a wise investment, while others have no need. So take care to evaluate the best insurance coverage for your specific needs.

Sometimes you learn essential information about the property when buying homeowners insurance. That’s why many experienced home buyers get a home insurance quote before buying the house or even before deciding on any specific property.

Once you’ve found the policy that’s best for you, check that it meets the requirements of your lender. Most financial institutions won’t fund a mortgage, or home equity lines of credit, without establishing homeowners insurance before closing. In fact, some lenders may require that you purchase extra coverage in addition to a basic homeowners policy.

After determining that your desired policy meets your lender’s requirements and your specific needs, you can purchase the insurance. This should be done sometime before you to officially close on your home. The insurance company will normally pre-approve the policy and then wait for your escrow/title company to send a request for Proof of Insurance when the final closing date is near. The insurance company will then email or fax the confirmation of coverage before the closing date.

Protecting Yourself and the Lender

Buying homeowners insurance protects your new home in case of disasters such as a burst pipe or fire. This safety net offers a clear advantage for the homeowner should an accident occur. Rather than paying out of pocket for expensive repairs, the insurance covers the cost of repairs, minus the deductible. Homeowners can relax knowing their home is protected, and they can continue enjoying their investment.

Buying homeowners insurance also protects your lender. Having invested their money to facilitate your purchase, your lender wants to know that their investment is safeguarded. That’s why buying homeowners insurance is usually made simple with an escrow account. This account is set up by your lender to hold funds for certain property expenses. Some of your monthly mortgage payment is put into your escrow account by your lender. They can then pay your insurance costs and/or property taxes using the money in the account. Paying the premium on your behalf protects the lender by allowing them to verify that your home is covered. The escrow account also makes your life as a homeowner less stressful, as you pay one monthly payment to the lender rather than paying several different monthly, yearly or quarterly payments to various outlets.

Smart and Necessary

Buying homeowners insurance before closing is a smart and necessary move that protects the big investment of a new house. In addition to covering repairs to your home, many policies offer some coverage for you and your family’s belongings. Basic homeowners policies usually include liability coverage to protect you against legal action if someone is hurt on your property. These lesser-known benefits of homeowners insurance increase the value of purchasing a policy.

The amount of coverage your lender requires for your new home may not be clear. Each lender may differ in their requirements regarding buying homeowners insurance, so it’s important to understand exactly what coverage is needed. Additionally, there may be extra coverage options that are not required but are included in your homeowners insurance policy or offered optionally. If you have any questions about what’s covered in your policy, speak with a helpful Wawanesa homeowners insurance agent by calling 800-640-2920. Your agent can help you determine if you have enough coverage to meet the lender’s requirements.

What Does Homeowners Insurance Cover?

When buying homeowner insurance, it’s critical to understand the protection you will receive. Most basic policies provide the following coverage:

Dwelling Coverage

Dwelling coverage details the part of your policy devoted to covering the costs to rebuild or repair the structure of your home. It also covers installed features and appliances permanently attached to the structure.

Structural Coverage

Structural coverage covers all other structures on your property other than the dwelling place — your home. For instance, this section covers a detached garage, guests quarters, or fence.

Personal Property Coverage

This portion of your homeowners insurance covers the cost of repairing or replacing your belongings damaged due to a covered loss, such as a fire or theft. If you have a considerable amount of expensive jewelry, artwork, or furniture; it’s wise to investigate enhanced personal property coverage when buying homeowners insurance.

Loss of Use Coverage

If your home is badly damaged due to a covered loss, this portion of your insurance policy will pay some of your living expenses should you be forced out of your home. For example, if you need to stay in a hotel while your home is repaired, that will fall under loss of use coverage.

Personal Liability Coverage

When buying homeowner insurance, you are also securing protection against getting sued for accidents that occur on your property. This coverage can pay for property damage or bodily injury when someone visits your home. This would include visitors and repair technicians, for example.

Riders

Buying homeowners insurance is never one-size-fits-all. While the policy may have standard coverage and deductibles, it can also be customized to meet your specific needs through riders. You can boost your coverage limits or add new forms of coverage through riders. Examples include increased personal property coverage, flood, or earthquake.

Your HOA and Homeowners Insurance

If your new home is in a subdivision or planned community, you are likely required to pay a homeowners association fee. Also known as HOA fees, this money helps cover the upkeep and maintenance costs of the community where your home is located. Often included in HOA fees are your home’s portion of an insurance policy that covers the common areas for the community and/or complex.

As a community member, this HOA policy is partly your responsibility, but it does not cover the structure of your home, your personal property, or the belongings inside of it. HOA insurance does nothing to protect your new house from damage or disaster. Buying homeowners insurance is essential for protecting your home. A homeowners policy covers the physical structure of your home and your personal property within your property lines.

Your HOA and Condominium Insurance

The insurance policy purchased by the Condominium Association offers coverage for the common areas and, in most cases, the basic structure of a condominium or townhouse complex. It is best to check your Association’s master insurance policy to confirm what portions of the structure are covered. Swimming pools, tennis courts and playgrounds for the neighborhood families to enjoy are usually covered in this policy. As a part-owner of these amenities, it is partly your responsibility to pay for accidents or liabilities that may occur in community areas. A portion of your HOA fees are used to cover this insurance policy.

It is critical to understand your potential exposure as a member of the Condominium Association. For instance, should a child sustain an injury on the community playground and the parents decide to sue the Association, you may be liable for a portion of the costs. Any loss costs in excess of the Association’s coverage limits are passed on to you as a part-owner of the community. You may be able to add additional HOA coverage to your condominium insurance policy. This could protect you in the event the Association’s insurance is insufficient to cover the community expenses related to a covered loss.

Flood, Wildfire, and Earthquake Coverage

There are some limitations to basic homeowners insurance policies. Depending on your home’s geographical area, you may need to purchase additional coverage for disasters such as floods or earthquakes.

Most homeowners insurance policies cover accidental flooding from a burst pipe or other water leak in your home, but they usually do not cover flooding caused by a natural disaster. Homes that are built on a floodplain or are in commonly-flooded areas benefit from supplemental flood insurance. Your lender may even require buying homeowners insurance with additional flooding coverage if you live in a floodplain.

Fortunately, most homeowner’s insurance policies cover damage due to wildfires. and other bushes around your neighborhood may be gone.

Buying homeowners insurance with supplemental earthquake coverage is another consideration not included in basic policies. An earthquake can create major issues for the structure of a home or destroy the structure completely. Homeowners living in areas prone to earthquakes, such as along a fault line, should invest time into checking that their home has modern earthquake protections built in. For owners of older homes, it is especially important to double check if their home has been retrofitted to comply with modern building standards in earthquake protection. Even with structural protections in place, a major earthquake can make a home unlivable. Relatively minor earthquakes can still do extensive cosmetic damage. Earthquake insurance, in addition to a basic homeowners policy, can help you repair or rebuild if your home is damaged or destroyed in an earthquake.

Homeowners insurance policies offer both you and your mortgage lender protection of the investment of your new house. Take the time to understand how to get homeowners insurance when buying a house by researching what coverage your new home needs. Your lender probably requires at least a basic homeowners insurance policy and may require additional coverage for natural disasters such as floods or earthquakes.

Call Wawanesa now at 800-640-2920 to have your questions about insuring your home answered by one of our helpful agents.