For most new home buyers, obtaining homeowners insurance is an important part of buying a home. Knowing what homeowners insurance is, what it does, how it protects buyers and when it's required can help keep the home buying process smooth.
Homeowners Insurance Protects You From Financial Liability
Homeowners insurance is a product that protects the homeowner from financial liability if the home or its contents are damaged in a covered event. When a covered event, the insurance will pay to repair or replace what has been broken, damaged or destroyed. What is covered by a homeowners insurance policy can vary from one policy to the next. Typically, a policy will cover damage from the following events:
- Fire & smoke
- Vandalism & theft
- Windstorm & hail
- Freezing of the plumbing system
If the home is damaged because of these covered events, the insurance policy will usually pay for the repairs. The homeowner is only responsible for the deductible, which is usually around $500 or $1,000.
Insurance Pays Medical Bills if Someone Is Injured On the Property
Another benefit of having homeowners insurance is that it will pay money towards medical bills if someone is injured on the property. For example, if a homeowner has someone over to their house and that person slips and falls on the front stoop of the house, the homeowners insurance will pay money towards the injured person's medical bills and will also protect the homeowner if they are sued - subject to any deductibles, maximums or limits described within the policy.
Requirements to Have Insurance If You Have A Mortgage
Homeowners do not necessarily need to have homeowners insurance if they do not have a mortgage - though they are strongly encouraged to do so. However, a homeowner is required to have homeowners insurance if they get a mortgage. Lenders want homeowners who borrow money from them to get a mortgage because they want to ensure that their investment is protected. The home buyer must get an insurance policy in order for their mortgage to fund when they buy a home.
If the homeowner allows the insurance policy to lapse after the mortgage has been approved, the lender may sign the homeowner up for insurance for them and then bill the homeowner for the premium along with the mortgage. These special insurance premiums are often much more expensive than standard homeowners insurance policies, so it's rare for homeowners to allow their insurance to lapse.
Homeowners Insurance Can Be Valuable
Even homeowners who pay for their home in cash often find that homeowners insurance can be valuable. Since many homeowners do not keep enough cash on hand to pay for catastrophic damages when they occur, so a homeowners insurance policy can save some homeowners from financial ruin.
Not All Events Are Covered
Some types of damage are not covered by Green Hills homeowners insurance policies. For example, damage from floods are rarely covered in a normal homeowners insurance policy. Most homeowners must seek special flood coverage if they live in an at-risk area. Earthquakes are usually not covered as well.
Homeowners who live near the coast or near a river must seek special flood coverage in addition to their normal homeowners insurance. The same is true of earthquakes: homeowners seeking protection from earthquakes must get special insurance in order to be protected.
In Escrow? Start Shopping for Homeowners Insurance Today
If you're a home buyer who is in the escrow period, now is the time to start shopping for homeowners insurance. Contact insurance companies today to get the best rates and coverage.