You may be wondering about homeowners insurance while you shop for the house of your dreams. In order to understand how homeowners insurance works and when to purchase it, it’s logical to ask the following: Is homeowners insurance necessary? Do I need homeowners insurance before closing? And if so, at what stage in the house buying process do you purchase it?
The majority of mortgage lenders will require homeowners insurance even if you don’t plan on moving in immediately after closing. Find out when you need homeowners insurance by reading these frequently asked questions.
Is Homeowners Insurance Mandatory?
There are no laws requiring homeowners to have insurance. However, in order to get a mortgage, you are required by your lender to acquire home insurance coverage. Mortgage lenders are covered by home insurance if they experience a catastrophe such as fire, lightning, a tornado, or another covered event that damages or destroys the home.
Your homeowner’s insurance should be in force at least three days prior to your closing date since the mortgage company will usually require evidence of coverage at this time. Due to this, you should commence the home insurance comparison process no less than a few weeks (2-3) before your closing.
Although homeowners insurance isn’t a requirement for homeowners who own their houses outright, they should still get it. As most new homeowners cannot afford to buy their new home outright, a mortgage loan will be necessary. Mortgage lenders need homeowners insurance to protect their interests when you are approved for a home loan. Should your home suffer significant damage or be destroyed, the lender is protected for the mortgage amount. Lenders can use it to recover losses.
Homeowner’s Insurance: What Type is Right For Me?
In general, your homeowner’s insurance plan will usually include coverage for:
- The Home: In the event of a covered loss, homeowners insurance coverage can assist in the repair or reconstruction of your house and possibly other structures on your property, such as patios, detached garages, and storage sheds.
- Your Possessions: If you have a covered loss, a homeowners insurance policy can compensate you for replacing your possessions, such as furniture or electronics.
- Temporary Living: If your home needs to be repaired or rebuilt, then your homeowner’s insurance policy may provide coverage for additional living expenses (ALE).
- Liability: Guests can sue you for slipping on your walkway. In this case, your homeowner’s insurance will help cover associated medical bills, legal costs, and any court awards.
It is normal for homeowner’s policies to exclude coverage for earthquakes or flooding. You may be required by your lender to purchase separate earthquake or flood insurance depending on where your home is located.
Guided Solutions is dedicated to helping you choose the right insurance company and coverage that fits your needs. Contact our insurance experts today and learn how we can help.