If you want to buy a home, make sure that you factor in home insurance when shopping around so that you don't end up with a difficult-to-insure property. The following are some of the things you should know about insurance coverage when buying a home.
The Lender Insists on Coverage
The first thing you should know about homeowners insurance is that it is not up to you whether to buy the coverage or not. Both you and your mortgage insurance company have financial interests in your home. If you are unable to pay your mortgage, the lender can repossess the property, sell it, and recover their money. This might not be possible if the property is damaged, and you don't have the money to fix it (a real possibility if you don't have coverage). Thus, mortgage lenders insist on insurance coverage as part of mortgage requirements.
You Need Proof of Coverage Before Closing
Another thing you should know is that you don't buy the house and then buy the insurance; it actually works the other way around. This is because if the mortgage company advances your loan and you close the purchase without insurance, there is nothing to stop you from reneging on your promise to buy coverage. The mortgage company will require proof of insurance coverage on or before the closing date.
You Need To Shop Early
Even though proof of coverage is required on or before the closing date, this doesn't mean that you should wait until the closing date to buy coverage. This is dangerous because you cannot be certain that you will get the coverage you require at the right price. What if the insurance company you want to deal with discovers hidden damage on the property that makes the home risky to cover?
Early shopping gives you the opportunity to compare offers and rates so you can work with the best insurer. Note that although the insurance company may have a preferred lender, you have the right to buy coverage anywhere you choose as long as it meets the lender's requirements.
Pay a Year In Advance
Lastly, you should know that you will need to pay the yearly premiums in advance. Lenders won't allow you to pay one-month coverage and close the deal. Again, there is a strong risk that you might lack the money after the first month and drop coverage. Therefore, you need to pay a year's work of premiums before purchasing the house.
Contact a resource like Crowel Agency, Inc. in order to learn more about homeowners and home insurance that is available in your area.