5 Types of Insurance Coverage Every Homeowner Should Know About
Buying a home is one of the biggest financial investments a person can make. And just like any investment, it needs to be protected. This is where insurance comes in.
There are a number of factors to consider when purchasing insurance coverage but it usually boils down to the type of home you own and its location.
Finding the right insurance policy can be a headache. With all the options available today, how do you know which ones you truly need?
Here we’ve made a rundown of the essential insurances a homeowner needs to have:
For someone whose house was purchased using a mortgage, this right here can be a requirement. If you bought the house in cash, this insurance isn’t mandatory but necessary.
A standard homeowners insurance provides financial protection against damages or loss due to accidents, disasters, and theft and allows you to rebuild or make necessary repairs. However, flood and earthquake-related damages aren’t covered so you may need to take out another policy for that.
Just like homeowners insurance, this isn’t mandatory for people who bought the property outright. However, it’s still very important to have title insurance. For mortgage-dependent buyers, this one’s a must.
Title insurance is especially useful for people who purchased a foreclosed home or a short sale property. It protects the policyholder homeowner from anyone who may claim ownership of the property and file a lawsuit. It ensures that the owner is covered from any kind of liens attached to such property.
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Depending on your location, a flood insurance may be optional, necessary or required.
Damages to your real estate property caused by floods won’t be covered by your homeowners insurance which is why you need to have a separate policy for this.
It is optional if you live in a place where flooding isn’t a common problem. This provides extra protection in case nature suddenly shifts its course.
It’s necessary when your location isn’t tagged a flood-prone area but has a potential to experience flooding.
A flood insurance becomes a requirement when you buy a house if it’s is in an area considered as flood-prone.
Remember that it’s better to have it but to never actually use it than not having one when you really need it.
To some, a flood insurance may seem unnecessary. An earthquake insurance is viewed in the same way. However, you don’t want to realize importance when it’s already too late.
4.Private Mortgage Insurance
The only person who can benefit from this insurance is your lender. So it’s better to avoid having this added expense.
A private mortgage insurance is a must when a homebuyer fails to meet the 20 percent down payment for a house. Such down payment is required to secure a conventional mortgage. If they pay lesser than 20 percent, the lender will require a PMI.
This provides a cushion for lenders in case the borrower defaults on the loan. Meaning, you are paying the insurance that only the lender can benefit for.
However, this isn’t permanent. PMIs can be removed once the homeowner has built substantial equity over a given period of time.
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5.Mortgage Life Insurance
Many people may not be familiar with this life insurance. However, this can be very useful especially when a homeowner has chosen a lengthy mortgage term.
When you die, mortgage life insurance will pay either your lender or your chosen beneficiary a sum of money which is used to cover any remaining mortgage balance. This insurance policy ensures that the home remains under the ownership of your family or beneficiaries after you’re gone.
As important as knowing the right property to buy and the kind of mortgage to get is knowing which insurance types you must have. Insurance policies may seem like an added expense, however, they are necessary to protect one of your prized possessions — your home.
Know more about these home-related insurance policies by talking to an expert today, free of obligations.