When does the lender require you to purchase the homeowners insurance policy?

When you’re looking for a home a question on your mind might be, do I even need homeowners insurance and when should I get covered if it’s a necessity? There’s not exactly a law in place that requires you to carry homeowners insurance, but if you’re looking to finance your home through a mortgage lender there’s a good chance they will require you carry some sort of coverage.

Your mortgage company will want you to have homeowners coverage before the loan closes. Typically this can be done within escrow and can be added to your monthly mortgage payment. The common mortgage term for this is PITI (Principal, Interest, Taxes, Insurance). Meaning within your mortgage payment you will pay the principal and interest of your home loan, as well as the taxes and homeowners insurance all in one payment. 

Please don’t confuse PITI with PMI. PMI is private mortgage insurance, and is designed to cover the lender, not the homeowner. In this article we are referring to homeowners insurance that covers you, the homeowner. 

You will roughly have 30 days from the date you signed the paperwork for you home to get homeowners insurance. The lender will want you to show proof of the policy before closing. 

If you are paying for your home out right and will not finance the home through a mortgage company it’s completely up to you whether or not you carry homeowners insurance. 

What type of home insurance do you need

When you’re looking for homeowners insurance there are a few key features you may want to look at when deciding what’s best for you. We go over a few of the more common things below;

• The home and its structure being the most important part of what’s covered in the policy. Your homeowners insurance policy is designed to cover repairs or to rebuild your home if necessary. This can sometimes include other structures as well such as a shed, or a garage. 

• Your personal possessions within the home. Most homeowners insurance policies will cover the repair or replacement of your personal belongings. You want to make sure you keep good records of what you have within your home. 

• Legal fees due to being sued by a visitor of your property. If you own a pool that your neighbors love using, there’s always a chance someone can get injured. In most cases if a person is hurt on your property, you are liable. A good homeowners insurance policy will cover you in the event someone is injured at your home. Medical expenses and legal fees are the two primary portions of this coverage. 

• Temporary housing in the event your home is unlivable or under repair. Homeowners insurance can cover the costs of hotel stays or temporary housing if your home is being rebuilt or repaired. 

Earthquakes and flooding are not typically covered

If you need a home insurance policy that will cover you for an earthquake or a flood, you need to specifically look into earthquake insurance and flood insurance. Flooding that is the result of a faulty pipe that bursts, is usually covered in a typical home insurance policy. Although flooding that occurs due to excess rain that floods into the home, needs to be covered specifically through flood insurance.

Earthquake insurance is it’s own separate category as well. If you live in area where you have earthquakes often, please do not expect your normal policy to cover you. It’s always best to make sure you have earthquake insurance specifically.

If you have additional questions regarding homeowners insurance, please feel free to reach out to our wonderful agents. They can answer all of your questions about home insurance and get you an incredible rate as well! Call us today 916 313 6100