The process of buying a house is a complicated one and when you add in home insurance options, it becomes even more difficult. During the process of purchasing a home you will be made aware of many different kinds of home insurance that you can purchase. Knowing what they are and what you need (or don’t need) will help you obtain the right coverage, while saving you from unnecessary spending.
Title Insurance – If you are obtaining a mortgage to purchase your house you will be required to obtain title insurance. This insures that the title on the house is free and clear with no liens. It offers you the peace of mind of knowing that no one can knock at your door in the future to make a claim on your property. If you are paying cash for your house, title insurance is still recommended to protect your asset.
Homeowner’s Insurance – It is absolutely necessary if you have a mortgage for your house, but optional if you own your house outright. It might be tempting to save yourself the insurance premiums to skip the insurance, but that is never advised. Your homeowners insurance protects you from the financial responsibilities if your house is damaged from storms, fire, and other unexpected accidents. If you don’t have this type of insurance and your house burns to the ground, you are out of luck.
Moving Insurance – If you are moving a large amount of valuable items across the country, you may want to opt for purchasing private moving insurance. The insurance offered by the moving company will often not cover in the same way, or for the same amount as separate moving insurance. This insurance averages around $100 for every $10,000 of coverage.
Flood insurance – If you are moving into a flood zone, you will be required to cover flood insurance. The pricing is set on the federal level so there is no reason to spend time shopping prices. If you are moving near a body of water and you are concerned about flooding, but not located in a flood zone, this insurance is completely optional. However, keep in mind that if you do not have flood insurance and your house is damaged by flood waters, you will be 100% responsible for the cost of repairs.
Private Mortgage Insurance – If you make at least a 20% down payment on your home you will not be required to carry Private Mortgage Insurance (PMI). However, if you do not, your lender can require you to cover it until you have 20% equity in your home from what you owe. This insurance adds up and offers you no benefit as the buyer. The mortgage is to cover the risk of the lender.
Mortgage Protection Life Insurance – This type of insurance is to protect your family from being burdened by the debt of your mortgage if you pass away before you own your home outright. However, the majority of homeowners are better off with just purchasing term life insurance.
Umbrella Insurance – This type of insurance is not necessary for a lot of homeowners. This insurance expands the dollar amount of what your insurance covers. For low and middle-income homeowners, the regular insurance will cover everything you need. For homeowners who are wealthy or expecting a rise in their net worth, it could be a good idea to look into.
Knowing what home insurance you need will help you financially should a problem arise. Knowing what insurance you don’t need will save you from unnecessary spending. Make sure you are covered in the event that an emergency arises.