If you’ve ever owned a home or seriously considered buying one, you know that homeowner’s insurance is a pretty big deal. In many areas, it is a mandatory of the home buying process for the buyer to obtain some kind of insurance coverage on their new home. This isn’t as easy as it sounds, unfortunately, because homeowner’s insurance can be a complicated matter. The FAQ below will answer some of your basic questions about homeowner’s insurance, so that you may smartly shop around for potential policies.
What is Homeowner’s Insurance?
Also known as property insurance, homeowner’s insurance covers your home and its possessions in the event of a disaster. When damage is sustained to the home or its systems, the insurance company compensates the homeowner for all damages and loss.
What Does Homeowner’s Insurance Cover?
The most basic forms of homeowner’s insurance cover ten listed perils: Fire and smoke, lightning, explosions, damage caused by vehicles, damage caused by aircraft, theft, vandalism, damage sustained during a riot, volcanic eruptions and hail. Additional coverage is available but may require the purchase of a more expensive policy, for earthquake and flooding. Some policies also cover personal liability in the event of a person getting harmed on your property.
Is Homeowner’s Insurance Mandatory?
In some states, it is a legal requirement to purchase homeowner’s insurance when buying a home. Even in states where this is not the case, however, your mortgage lender will likely insist on this purchase before granting you a mortgage loan.
When Should You Buy Homeowner’s Insurance?
Homeowner’s insurance should be purchased before you reach out to a mortgage company for a home loan. Most of the time, lenders will not work with you unless you have taken this step.
Is Homeowner’s Insurance Covered by Mortgage Payments?
Unless the home has been escrowed, the answer is no. However, you may be made to pay for mortgage insurance in the event of your down payment being less than 20% of the home’s value. Mortgage insurance protects the lender, not the borrower, should you default on your loan.
How Do I Access the Benefits of my Homeowner’s Insurance?
If your home has been damaged by any condition that your policy covers, you need to file a claim with the insurance company to receive compensation. After the initial phone call, you will work with a claims adjuster to determine the extent of the damage sustained and the amount of compensation you can expect from a house insurance provider.