There are many incredibly important steps that a prospective buyer must take on their way to purchasing a new home. Some are familiar, others aren’t. Nevertheless, they must all be undertaken with the utmost attention and deliberation when considering the consequences. Just think about what can go wrong if you don’t have a homeowner’s insurance policy to fall back on!
A Guide to Homeowner’s Insurance and its Many Benefits
The Policy
Homeowner’s insurance, sometimes known simply as home insurance, is designed to protect a property and its belongings from any type of hazard, natural disaster or accident. Mortgage lenders frequently require home insurance as a way to protect their asset before collecting full payments from the owner.
What’s Covered
Basically, if there is property damage or any personal possessions are broken or taken, the homeowner will be covered, although individual details are different depending on the policy. Items that are casually broken aren’t included.
The list of criteria includes:
- Theft
- Vandalism
- Fire, smoke and lightning destruction
- Falling trees and branches
- Snow and sleet damage
- Plumbing or heating incidents
Furthermore, there is also a significant amount of liability included in most homeowner’s insurance policies. For instance, if a visitor is injured or harmed on a property, the policy will guarantee that the homeowner will not be held personally or legally responsible for any damages that the victim may seek.
The Price
First of all, it’s important to remember that there is no single fixed amount that one must pay to maintain a policy, although the national yearly average was $1,096 in 2016 according to the National Association of Insurance Commissioners.
Instead, homeowner’s insurance premiums depend on a variety of different reasons like:
- Location
- Size
- Construction type
- Property features
- Related risk factors
- Condition
- Prior claims
As a general rule of thumb, polices for homes in areas with high-crime rates and frequent natural disasters are typically more expensive. Also, premiums can vary according to the amount of claims that the homeowner is seeking to file on the property, as well as their credit score.
The Benefits
In some cases, mortgage lenders will ask a home buyer to prepay an entire year’s worth of insurance coverage before the property closing. Again, they want to ensure that the asset they’re collecting payments on will be taken care of in the event of an incident.
However, when an insurance premium is paid in full before closing, the homeowner will be able to exclude it from the closing costs. Also, when one is required to set up an escrow account for payments in periodic installments, their lender will usually manage it, meaning less finances to worry about.
For anyone looking to buy a home anytime soon, make sure that you learn all there is to know about homeowner’s insurance so you can protect yourself from any future liability!
