One of the biggest investments a person will make in their life is their home. Whether you opt for a two-bedroom bungalow, a sprawling mansion, or a quiet country home, your house will take up the vast majority of your income. It’s not just the initial cost that gets homeowners – it’s the interest on the mortgage and little things no one thinks about: homeowner’s insurance, HOA fees, and basic repairs that were previously covered by landlords.
Meeting with a lender can be nerve wracking. Sweaty palms, nervous fidgeting – so much rides on a mortgage, you’d be crazy not to be a little nervous. One requirement that you may forget about is the need for homeowner’s insurance.
When you get a mortgage, your lender wants to make sure you have homeowner’s insurance in order to protect your house. The insurance will cover your home, its contents, and some of your other assets if the worst should occur – a fire, theft, or a variety of other accidents or disasters.
You should know that homeowner’s insurance doesn’t cover things like floods, earthquakes, and hurricanes – you’ll need separate insurance for that. In many cases, your lender will want you to have this additional insurance. Note that if you’re purchasing your home in a high-risk flood zone, it’s federal law that you need to have flood insurance.
A lot of people ask – why is homeowner’s insurance required? Well, first off, purchasing homeowner’s insurance is a good idea even if it isn’t required. However, lenders require you to purchase homeowner’s insurance because it protects both you and them.
Think about it. Let’s say a disaster hits your house while you’re paying off your mortgage. You no longer have a place to live, you’ve lost all of your possessions, and you may even lose your job if you can’t take some time off of work to get everything sorted out. In cases like this, homeowner’s insurance will protect you, as it can pay off your mortgage. This protects the lender.
Acquiring Homeowner’s Insurance
In order to get homeowner’s insurance, you’ll need to speak with whatever lender you’ve chosen. Most insurance companies will have similar requirements. They’re going to do a credit check to see if you qualify, and they’ll need to collect a variety of information on the home they’re insuring: the appraised value, the risk factors, the history. In order to get the best insurance rate possible, you should speak to as many questions as possible and get a variety of quotes.