What is Homeowners Insurance and
Do I Need It?

Homeowners insurance provides financial protection against possible perils or disasters that may occur to your residence and all the things you keep in it. It is a package policy, which means it covers loss when there is damage to your property, and it covers your liability (legal responsibility) for any injuries and property damage you or members of your family (or even pets) may cause to other people or other people's property.

Damage caused by most disasters is covered, but there are exceptions. The most significant are damage caused by floods, earthquakes, and /or poor maintenance on the part of the owner. Flood and Earthquake Insurance, which are regionally related, are typically purchased as separate policies or can be included in an Umbrella policy. Consult with your insurance agent and make sure you understand all exceptions and exclusions on your particular policy. The maintenance of the property is the sole responsibility of the homeowner.

Until your mortgage is paid in full, the lender has the right to require you to carry adequate homeowners insurance in order to protect your and their investment in the event of a loss. An estimated amount appears on the Good Faith Estimate, and the actual amount is shown on the HUD1, the closing document that lists all settlement costs. It is not part of the mortgage cost, but lenders require that their "minimum insurance requirements" be met before they will fund a loan.
These requirements can vary from lender to lender, however, on a house purchase, most will require that the premium be paid for the first year at closing. If you plan on maintaining an Escrow account, an additionl amount equal to several months of premiums must be paid to fund the account.

CONTACT US with questions about homeowners insurance.