There are various insurance requirements associated with home ownership. You could confer with a insurance specialist but in many instances insurance matters are dealt with by your mortgage broker and by your lawyer. Home insurance is the only type of insurance that you’ll need to be the most hands on with.
As with any type of insurance you’ll want to have a clear understanding of coverage, limits, restrictions, rates and overall policy suitability to ensure that your needs are being appropriately addressed.
Below is an overview of the three most important types of insurance:
Home Ownership Insurance
Homeowners insurance protects your home against fire, smoke, wind, hail and vandalism. In addition it will provide liability coverage against injury to you, your family or any of your visitors.
Homeowners insurance is required by your lender and you will not obtain your mortgage financing until you have your homeowners insurance in place. The amount of insurance coverage will be in an amount equal to your mortgage. This protects the lender with security for their loan should there be property damage or loss.
You also want to ensure that the contents of your home are protected. Coverage can be obtained for full replacement value.
If you are a non-smoker, you’ll get a discounted rate as will be the case if you opt to install a monitored burglar alarm.
You might already have a relationship with an insurance broker but if not, your Realtor will be able to recommend someone to you.
Mortgage Life Insurance
This is a life insurance policy with the amount of insurance being equal to the principal amount of the mortgage. In the event of the mortgagor’s death, the balance of the mortgage is paid off.
Lenders do not usually make their commitment to place a residential mortgage with a buyer contingent upon the buyer taking out mortgage life insurance. An exception to this would be mortgages for very high amounts.
You can get it through the lender or mortgage broker at the time you take out your mortgage.
“Title” legally describes the ownership of land. Purchasers want insurance that the property they are buying will legally be theirs and they will receive “good and marketable title” to it. Those with any claim to your property should be restricted only to any mortgagee(s) and the government if taxes are not paid. Title Insurance eliminates the risks of a defective property title by providing the compensation necessary to rectify covered title defects. Most policies also pay the cost of defending against any covered claim. Unlike Homeowner’s Insurance which protects you from an unforeseen event in the future, Title Insurance protects you from an undetected defect or fault in the past.