10 Step Home Buying Process
Step 8: Get Insurance
No one would drive a car without insurance, so it figures that no homeowner should be without insurance. If you are obtaining a mortgagor on the home, you will most likely be required to get Home Owners Insurance and possibly Flood Insurance , depending on where the home is located.
The essential idea behind various forms of real estate insurance is to protect owner and the bank in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.
What kind and how much?
Title Insurance: Purchased with a one-time fee at closing, title insurance protects owners in the event that title to the property is found to be invalid. Coverage includes "lenders" policies, which protect buyers up to the mortgage value of the property, and "owners" coverage, which protects owners up to the purchase price. In other words, "owners" coverage protects both the mortgage amount and the value of the down payment.
Homeowner Insurance: Homeowners insurance provides fire, theft and liability coverage. Homeowners' policies are required by lenders and often cover a surprising number of items, including in some cases such property as wedding rings, furniture and home office equipment.
Flood Insurance: Generally required in high-risk flood-prone areas, this insurance is issued by the federal government and provides as much as $250,000 in coverage for a single-family home plus $100,000 for contents. Local REALTORS® can explain which locations require such coverage.
Home Warranties: With new homes, buyers want assurance that if something goes wrong after completion the builder will be there to make repairs. But what if the builder refuses to do the work or goes out of business?
Home warranties bought from third parties by home builders are generally designed to provide several forms of protection: workmanship for the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up to 10 years.
Home warranties for existing homes are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost.
Insurance policies and warranties have limitations and individual programs have different levels of coverage, deductibles and costs. For details, speak with your Buyers Agent, Insurance Brokers or Agent and the home builders.
Insurance Agents / Brokers: Home insurance and such policies are available from insurance brokers, large banks, credit unions and on-line insurance companies. You should spend time weighing out each detail in comparing policies as over insuring is very common though the only injury is to your wallet where as under insuring can be catastrophic.
Don't get confused in terminology here. A Buyers Agent represents the Buyer, but in the Insurance Industry an Insurance Agent represents the Insurance Company whereas an Insurance Broker represents the client (you) and looks for the best policy available to you from various insurance companies.
Be sure to discuss limitations, replacement cost, deductibles, endorsements and riders with your insurance broker or agent.
Step 1: Your Financial House
Step 2: The Buyers Agent
Step 3: The Pre-Approval
Step 4: Look at Homes
Step 5: Choose a Home
Step 6: Get Financing
Step 7: Making an Offer
Step 8: Get Insurance
Step 9: The Closing
Step 10: After the Closing
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