When it comes to buying a new house, there are numerous factors to consider. These could range from the ideal location, the type of home, the number of beds and baths, a full home or property assessment, as well as property taxes. However many do not know what first time buyers should know about home insurance.
Yes, this is an exciting time for any first-time homebuyer. However, costly mistakes can happen! While you may be enthralled with the style and location of your new house, don’t neglect the importance of looking for insurance. Read on to discover what first-time home buyers must know about insurance.
Understanding Mortgages and Home Insurance
Homebuyers who secure a mortgage will almost definitely be required to pay homeowners insurance to protect their investment.
Homeowner’s insurance is typically held in an escrow account along with property taxes. Your mortgage lender receives and pays your homeowners insurance premiums through escrow, which is a separate account. Additionally, escrows are useful because they relieve financial stress.
Certain lenders necessitate the establishment of a mortgage escrow account to hold funds for taxes and insurance. If you put down less than 20% on a home, your lender may need an escrow account. Although if you put down at least 20%, you may be able to have house insurance included in your mortgage payments.
Be prepared to pay a higher interest rate if you discover a lender willing to forgo the escrow account requirement. This is an ideal move since it allows them to store money in an interest-bearing account until the loan matures.
While it is not required, your lender may require you to pay your annual homeowner’s insurance payment in advance. If your lender accepts quarterly or monthly payments, your insurance company may also impose a small fee.
What Homeowners Insurance Can Cover
Fire, lightning, tornadoes, explosions, vandalism, and theft are all covered by standard homeowners insurance. They are classified by the following:
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Dwelling
This covers the cost of reconstructing your home’s structure if it is damaged by a calamity other than those specifically excluded, such as floods.
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Personal Property
This pays for the expense of replacing or repairing personal property that has been stolen or damaged by fire. A policy can be modified to include coverage for any ailment that is not clearly listed as an exclusion.
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Liability Insurance
This protects family members from bodily harm and property loss. The normal homes insurance liability limit is $100,000, but consider boosting it to $300,000 or $500,000 to cover any legal fees. Meanwhile, minor injuries caused by a guest on your property may often cost between $1,000 and $5,000.
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Additional Living Expenses Coverage
This protects you against additional expenses like hotel bills, meals, and pet boarding if you are unable to live in your home due to a covered disaster like a storm or fire.
What To Look For in An Insurance Company
Purchase homeowners insurance as soon as you know the address of the house you want to buy. This allows your insurance company to prepare the necessary paperwork before the closing. Moreover, these are the characteristics you should look for when comparing home insurance companies:
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Service Evaluation
It is vital to understand how an insurance company processes claims. This way, you can gauge if your insurer can satisfy you with their service.
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Financial Standing
Check the organization’s financial viability before acquiring insurance to ensure that the company has the ability to pay claims.
Conclusion
Buying a policy is all about security. As a first-time homebuyer, you must take into consideration what you need to protect to know the right coverage you prefer. This could include your home’s reconstruction, your personal belongings, as well as the physical health of your family and pets. As such, you must seek professional assistance to make guided decisions.
Are you in need of a homeowner’s rental insurance? Quesurance is a Hopatcong-based insurance agency that has also served communities in New Jersey. With us, your property and your family are protected in almost all situations. Be prepared today and give us a call to get started!
