When you’re buying a home, mortgage lenders require proof that you have insurance to cover the property in case of fire or other damage.
This is to protect their investment, as well as your own. Most people buy what’s called a homeowner’s policy, which combines protection for your dwelling and personal belongings.
Lenders usually require that you carry enough insurance to cover at least 80 percent of the loan amount. So if you’re borrowing $100,000 to buy a home, your policy would need to cover at least $80,000 of damage. Some lenders may require more coverage; check with yours to be sure.
A standard homeowner’s policy covers dwelling protection and personal liability. Dwelling protection pays to repair or rebuild your home if it’s damaged by fire, windstorm or another covered event listed in the policy (varies by insurer). Personal liability protects you from lawsuits if someone is injured on your property or if you accidentally injure someone else away from home (again, coverage varies by insurer).
The process of buying a home is exciting, but it can also be overwhelming.
There are so many things to think about and remember. One important thing to remember is to get the right insurance in place before you sign on the dotted line.
Your lender will require you to have homeowners insurance in place before they will fund your loan. This protects their investment in your home, in case something happens to it. Homeowners insurance includes coverage for your home’s structure, as well as your personal belongings inside.
Most homeowners insurance policies also include liability coverage. This is important in case someone is injured on your property. For example, if your dog bites someone, or if a delivery person slips and falls on your icy sidewalk, your liability coverage would help pay for their medical bills.
You may also want to consider flood insurance or earthquake insurance, depending on where you live.
These types of natural disasters are typically not covered by standard homeowners insurance policies.
Talk to your insurance agent to make sure you have the right coverage in place before you buy your home. It’s one less thing to worry about as you navigate the exciting process of becoming a homeowner.
When you are taking out a mortgage, your lender will require you to have insurance to protect their investment in your home. There are two types of insurance that you will need to have in place before you can close on your mortgage: private mortgage insurance (PMI) and hazard insurance.
Private mortgage insurance is insurance that protects the lender in the event that you default on your loan.
If you put down less than 20% when you are taking out your loan, your lender will require you to have PMI. The cost of PMI varies, but is usually between 0.5% and 1% of the loan amount.
Hazard insurance is insurance that protects your home from damages caused by events like fire, wind, or hail.
Your lender will require you to have hazard insurance in place before you close on your loan. The cost of hazard insurance varies, but is usually between $500 and $1,000 per year.
