This is a post from Tali Wee at Zillow.com. Enjoy!
The process of buying a home is both exciting and detailed. Buyers must present their lenders with countless documents specifying their financial standing and reliability as borrowers. In addition to producing numerous documents, buyers must acquire homeowners insurance for the remainder of entire loan terms.
Here are three important aspects of homeowners insurance that buyers and owners should understand.
1. Homeowners Insurance Is Required
Lenders require borrowers to obtain homeowners insurance to ensure their investments are protected in case of unpredictable damages to properties or financial burdens to borrowers. As long as homeowners carry mortgages they are required to obtain basic policies.
Buyers should shop around for the best insurance rates and personalized policies that suit their specific coverage needs. Most homeowners have highly-valuable belongings worth insuring. Buyers looking for discounts should contact their auto insurance providers for bundled insurance quotes.
2. Homeowners Insurance Protects More Than the Home
Not only does homeowners insurance protect investments, it covers homeowners’ personal belongings, liability and protection against theft and natural disasters. Homeowners insurance can cover jewelry, clothing, furniture, bicycles, expensive equipment and other itemized possessions. Additionally, most homeowners insurance plans cover belongings stolen from cars and some even cover belongings while homeowners travel.
If a house guest falls and obtains an injury, liability coverage protects homeowners through lawsuits or payment of medical bills. The same applies to damages inflicted on other properties, such as a homeowner’s deck caving and falling on their neighbor’s property; homeowners insurance would cover the repair costs owed to the neighbor.
Many natural disaster damages are covered by homeowners insurance such as hail, wildfires, tornados and hurricane damages (excluding related flooding). High-risk locations require additional insurance coverage including flood policies or earthquake insurance. In the case of severe property damages where homeowners are displaced from their homes, insurance even covers shelter costs to avoid high prices of extended stays at hotels.
3. Home Insurance Premiums Fluctuate
Upon purchasing homes, buyers might shop around for policy prices and feel confident they have the best possible rates. However, as most businesses adjust their pricing, insurance providers alter their premiums to match competitive market rates. Buyers should shop for new, lower homeowners insurance rates annually to ensure the best rates.
Beyond standard business price increases, elevated onsite risks prompt higher premiums, too. Older homes with outdated roofs, electrical or plumbing systems carry higher risks for structural, fire or water damages. Home improvements increasing square footage or adding swimming pools can also raise premiums.
When insurance prices rise, monthly mortgage payments increase. Monthly mortgage payments consist of principal, interest, taxes and insurance. On fixed-rate mortgages, the principal and interest costs remain the same throughout the life of the loan. However, owners shouldn’t be surprised by inflated mortgage payments due to tax increases or larger insurance premiums. Home buyer and owners must keep in mind that monthly payments are susceptible to increases – sometimes a couple hundred dollars per month.
Homeowners should prepare to pay more for their insurance in the future and continue to update their policies along with home upgrades. Finding the right policy and detailing possession can save homeowners thousands of dollars if damages occur.
Kim’s Comments: Last year, lots of people in Colorado found out the hard way that flood damage is not part of a standard homeowner’s policy. It’s always a good idea to make sure you have all the coverage you could possibly need before the unimaginable happens.