When you're buying a home, you're going to need to start thinking of protecting your property in the event of a disaster. What does homeowners insurance cover, and do you need it?
As with any other type of insurance, homeowners insurance is designed to protect your investment in your home in the event it's lost, damaged or threatened by any injury that might occur to someone visiting your home. While you're still paying on a mortgage or a home equity loan, the investment in your home-as well as the risk of loss-also is shared with the lender, be that a bank, an investment firm or an equity agency. Usually, anyone with a financial or equity interest in the home is also named on the homeowners insurance policy as an insured party.
The question of whether or not homeowners insurance is necessary is usually a moot point for people who carry a mortgage or home equity loan, because the lender will insist on it as a way to protect the firm's investment until your debt is repaid. In most cases, you agree to carry uninterrupted insurance when you sign the papers for your mortgage or your equity loan. Should you decide to drop your insurance, refuse to pay the premiums or get canceled by your insurance company, most banks and lenders will impose insurance on you and add the cost of it to your loan. Typically, the cost of the insurance plan is added to your monthly mortgage or loan payment over the course of a year.
That's a path to be ardently avoided, since most investors will buy top-of-the-line insurance coverage and you will pay for it or risk losing your home.
If you own your home outright, there are advantages and disadvantages to carrying homeowners insurance.
It's important that you be as informed as you can be about your homeowners insurance choices. Read every word of every proposed policy very carefully, and ask your insurance agent questions about exclusions, limitations, options and claims. Remember that a home is likely to be the biggest financial investment you will ever make, so choose wisely and be prepared to react to policy changes many times throughout the years.
While a home inspector may miss certain problems during the inspection, a homeowners warranty lets buyer and seller know that problems in the home related to the warranty will be taken care of.
Think your credit score affects only your ability to borrow money? Think again. Your credit score also can affect your access to homeowner and car insurance and the size of your monthly premiums.