Reviewing the countless types of insurance available during the home buying process can be overwhelming. You already have so much to do to close on your dream home, do you really have to jump through more hoops? Well, yes. No sensible car owner would drive without insurance, so it figures that no would-be homeowner should be without insurance, either!
From title insurance to homeowner’s insurance, the essential idea behind various forms of real estate insurance is to protect owners in the event of a catastrophe. If something goes wrong, insurance can be the bargain of a lifetime. So what do you need, and how much is all this insurance going to cost you?
Here’s what types of insurance you should keep in mind when you’re looking to buy a home.
What types of insurance do you need?
There are various forms of insurance associated with home ownership, including these major types:
Title Insurance: Purchased with a one-time fee at closing, title insurance protects owners in the event the title to the property is found to be invalid. Coverage of this type of insurance includes “lenders” policies, which protect buyers up to the mortgage value of the property, and “owners” coverage, which protects owners up to the purchase price. In other words, owners coverage protects both the mortgage amount and the value of the down payment.
Homeowners insurance: This insurance provides fire, theft and liability coverage. Homeowners policies are required by lenders and often cover a surprising number of items, including in some cases such property as wedding rings, furniture and home office equipment.
Flood insurance: Generally required in high-risk, flood-prone areas, this type of 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. Local REALTORS® can explain which locations require such coverage.
Home warranty: With new homes, buyers want assurance that if something goes wrong after completion, the builder will be there to make repairs. But what if the builder refuses to do the work or goes out of business? Home warranties bought from third parties by home builders are generally designed to provide several forms of protection: workmanship for the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up to 10 years. Home warranties for existing homes are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost. Insurance policies and warranties have limitations and individual programs have different levels of coverage, deductibles and costs. For details, speak with a REALTOR®, insurance brokers and home builders.
When should a homebuyer get insurance?
The time to obtain different types of insurance and warranty coverage is at closing, so speak with a REALTOR® or insurance broker prior to closing. Be sure to ask about limitations, costs, deductibles and “endorsements” (additional forms of coverage that may be available).
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Republished from realtor.com: https://www.realtor.com/advice/buy/home-ownership-and-insurance/
Read the rest of the 10-Step Guide to Buying a Home: