What Is Homeowners Insurance?
You have a lot to consider in the pursuit of finding your first home, which is why it can be easy to gloss over something like your home insurance options. But choosing homeowners insurance is actually one of the most important steps in the home buying process. Many first time homeowners choose a policy without doing enough research, but one of the smartest things you can do as a new homeowner is understand how to protect it.
Take a look at what you need to know about homeowners insurance.
Do You Need Homeowners Insurance Before Closing?
Yes. Most mortgage lenders require that a buyer has homeowners insurance before they purchase a home. They’ll request proof of insurance before they agree to closing. This is because they want to make sure their investment is protected, since they’ll technically own the title of the home until you pay off the mortgage. So unless you’re paying in cash, you’ll need home insurance before closing.
The Basics of Homeowners Insurance
There’s a lot to know about homeowners insurance, but learning about it doesn’t have to be complicated or time consuming. We’ll start with the basics about what you need to know before buying a home insurance policy.
How Does Homeowners Insurance Work?
Home insurance is financial protection that covers damages to the interior and exterior of your home and your personal property. It also includes liability protection for you and your family members. It’s designed so you’ll have the funds to return your home and possessions, or additional structures on the property, back to normal if your home faces damage covered by your policy.
What Makes up a Homeowners Insurance Policy?
Although homeowners insurance isn’t required by law, typically your mortgage lender will require you to have it. Here’s a high-level look at the main components of homeowners insurance: property coverage, liability coverage and other coverage options.
From fires and storms to vandalism and burglaries, property insurance helps you recover from accidental damage or destruction to your home and its contents. In the event you need to repair, rebuild or replace what’s damaged or lost, homeowners insurance helps cover the costs, so you aren’t stuck paying everything out of pocket.
There are four basic categories of property coverage: