Like all valuable possessions in your life, you want to make sure your home is insured. Insurance will be required to obtain a mortgage anyway, so get shopping for a new policy!
Different Types of Policies
1) Homeowner’s Insurance (Hazard Insurance)
Homeowner’s insurance provides fire, theft and liability coverage. Homeowners’ policies are required by lenders and often cover a surprising number of items, including property such as wedding rings, furniture and home office equipment. Talk to your insurance agent about what your policy will cover.
There are many factors that will determine the premium you will pay. The age of the house, the square footage, the number of claims on the property in the last five years, and proximity to a fire hydrant are just some of the questions your insurance agent will ask to determine the insurability of the property.
Most agents use a cost estimator to figure cost replacement estimates. This will ensure that your home is insured for the correct amount.
2) Title Insurance
Purchased with a one-time fee at closing, title insurance protects the insured in the event that title to the property is found to be invalid. There are two types of policies: “lenders” policies, which protect the lender up to the mortgage value of the property, and “owners” coverage, which protects owners up to the purchase price.
Mortgage lenders will require that you purchase a Lender’s Policy to protect their investment. The Owner’s Policy is not required, but a good idea.
3) Flood Insurance
Generally required in high-risk flood-prone areas, this insurance is issued by the federal government and provides as much as $250,000 in coverage for a single-family home plus $100,000 for contents.
Your mortgage lender will order a Flood Certification to determine if flood insurance is needed.
There are other types of insurance policies available, depending on your location and specific needs. For example, certain locations prone to experiencing hurricanes, can require Wind and Hail Insurance as well.
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