What Types Of Insurance Do I Need When Buying A Home?

As with any other major purchase insurance is definitely a must when you are buying a home and if you are taking out a mortgage loan it is required. So what type of insurance do you need?

There are several types of insurance that may be required when buying a home and obtaining a home loan. These include title insurance, homeowners/hazard insurance, windstorm and flood insurance. You will normally be required to obtain insurance sufficient to pay off the amount of your mortgage balance or to cover the replacement cost of the home, as per the appraisal. Even if it’s not required, you certainly do not want to leave what is possibly the biggest investment of your lifetime unprotected.

Title Insurance

Title insurance is perhaps the most important and most needed type of insurance out of all of them. This protects you against any claims to ownership of the property by others. Though fortunately in many cases this is paid for by the seller depending on your contract and what is typical in your area.

Homeowners Insurance

Homeowners insurance, or “hazard insurance,” as it is commonly known, is the most common type of insurance; this covers most claims, such as break-ins and fires. You will find that you can get big discounts on your homeowners insurance by speaking with an insurance agent in advance who can tell you how things like installing an alarm system or getting hurricane shutters can help significantly reduce your premiums. You must be very careful to keep your homeowners insurance up-to-date, otherwise you face some major potential problems with your mortgage and could even incur thousands of dollars in extra bills from your mortgage lender if they “force place” insurance.

Windstorm Insurance

Despite the high price of homeowners insurance, it unfortunately won’t cover many of the major causes of damage to a home. This is especially true as it pertains to tornadoes and hurricanes. Those who live in areas that are most prone to these types of natural disasters areas, and/or are close to the coast, will likely be required to acquire windstorm insurance; and this can be quite costly and so, should not be overlooked when calculating the true cost of owning your next home.

Flood Insurance

While not very expensive, flood insurance can be required on all types of properties that you wouldn’t normally expect, and it can easily add another $50 or more to your monthly payment. The need for flood insurance is based on the chance of whether or not a record ‘100 year flood’ will affect your property. Unfortunately, this means even inland condominiums that are several stories high can be required to have it. In short, you should plan on paying for flood insurance if you are located in one of these ‘100 year flood’ risk areas. Otherwise, find a home outside of these types of areas – you will be glad to have the extra change in your pocket every month.