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Homeowners Insurance for First Time Homebuyers Homeowners Insurance for 1st Time Homebuyers - When purchasing a new home it is important to remember to include an average for a homeowners insurance policy. Many policies will cover up 125% of the dwelling coverage that is purchased. Insurers offer coverage for a dollar amount or for replacement of the structure. If your home were destroyed by fire, you would be compensated for the loss of the dwelling, but not for the value of the land. This is because the land still has value- you can sell it or rebuild on it. If your homeowners insurance is for a dollar amount, that is usually the value of the structure and its contents on the day you applied for the insurance, regardless of the home's increased value since then. Replacement coverage would pay to rebuild the structure as it was. A standard homeowners insurance policy includes different types of coverage. It includes:
Coverage for the structure of your home.
Coverage for your personal belongings.
Liability protection.
Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster. Most lenders will require that 12 months of the insurance be paid prior to closing on the loan. Homeowners insurance can be escrowed, included into your monthly payment, or you can pay it your self either monthly, quarterly, or annualy. When you are buying a house for the firs time keep in mind that even if you are escrowing your homeowners insurance that you will need to pay the first year upfront. The insurance payments that are being made within your monthly mortgage payment will go toward the next year's premium. Homeowners insurance is paid in advance for coverage, whether you pay it monthly or yearly. Do I Have To Buy Hazard Insurance? - If you have a mortgage on you home, you will have to buy hazard insurance, also known as homeowner insurance. Hazard insurance protects against losses due to most perils. As a financier of your home, banks require you to have insurance coverage in place to protect their investment. In addition, as a condition to granting the mortgage, banks require that you name them as a "mortgagee" on the insurance policy, which entitles the bank to be the payee in case of a loss. It is wise to get quotes from several different insurance companies before committing to one. You may be able to save money by having your house and your car insured by the same company. You can also ask your mortgage professional to recommend an insurer. If you are purchasing a home, a lender will typically require one full year of hazard insurance paid up-front before the loan is closed. They will ask to see the paid receipt from the insurance company before the final closing. Homeowners insurance, also referred to as hazard insurance, is different than mortgage insurance, also known as PMI or private mortgage insurance. It is very important to know the difference between the two. Homeowners insurance protects you, the homeowner, in case your house catches fire, your home is broken into, a water pipe bursts, etc... Private mortgage insurance is not required on all mortgages, usually only mortgages that do not have a minimum of 20% equity in them, and safeguards the lender in case of a default of your loan by you. PMI protects the lender, not you. There are ways around having to obtain PMI if you do not have the required 20% down payment or equity in your home, so consult your mortgage broker today and discover what your options really are. Also if you are refinancing an exisitng mortgage, and the new loan amount is higher than the current mortgage, you may have to increase your coverage. Your lender will work with the title or escrow company to make sure the coverage is adequate for the new loan.
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Information listed above is to be used for educational purposes only and is not guaranteed
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