Four Types of Insurance You Should Have at Closing

Published by nora | Filed under Buyer / Seller Tips, Market Trends, Mortgage / Finance, Real Estate

 You need four types of insurance when buying a home, and you need to have them at closing.

Title Insurance

This policy protects you and your mortgage lender in case the title to your home turns out to be invalid or defective. Defects can mean liens that were not initially recorded or claims made on the property after closing. Other defects covered are incorrect signatures on the title, fraud or forgery, encumbrances, usage restrictions and unrecorded access rights and easements. Typically, you pay for your own and your lender’s policies, but in some cases, the seller helps in paying the fees.

Homeowners Insurance

This policy is required by your lender to protect the money it has lent you, but you also need it to protect the money you’re investing in your home. When choosing a home insurance, you should buy the one that protects you from all risks in your area.

See to it also that your policy protects you from liabilities arising from injuries to your guests while they’re within your property. Lawsuits and medical costs can wipe out your finances if you don’t have coverage for liabilities.

In addition, if you have accumulated plenty of precious possessions like jewelry, decorative items and pricey electronics, you need to add coverage for these personal properties.

Another important thing you need to weigh when thinking of the premiums are replacement cost and actual cash value. Some insurers offer cheaper policies, but they’re actually offering policies that pay claims based on actual cash value, resulting in lower payouts as depreciation is deducted from the market value of your property. In contrast, replacement-cost policies pay you based on the actual cost of replacing your losses.

Flood Insurance

Standard home insurance policies don’t cover your losses from flooding, so you need to get a separate insurance policy from the federal government’s National Flood Insurance Program. Lenders require you to obtain flood coverage if the home you’re buying is located in a high-risk flood zone or if you’re applying for a federally-backed loan.

You can visit FloodSmart.gov to know your flood risk, to estimate your premiums, and to find an accredited flood insurance agent in your area.

Home Warranty

This warranty is generally given to you by your seller or your home builder. If you’re buying a new home, the warranty assures you repairs or replacement if you find defects later on. Typical warranties cover workmanship, mechanical problems and structural defects for the number of years specified on the warranty. For buyers of previously owned homes, typical warranties offer a pledge to make repairs or pay repair costs over a specified period.

All in all, with the help of a dependable realtor , you’ll be able to bring all the needed documents and insurance policies to your closing, so it is essential that you choose an agent experienced in your targeted location.