Homeowner insurance provides liability and loss protection should the "unthinkable" occur.
If you are obtaining a mortgage to purchase your home, your mortgage company (lender) will require homeowner insurance (aka “hazard” insurance) on the property at close of escrow. The requirement is to protect their interest in the property from loss or damage which if left unrepaired, un-built, or un-replaced would cause devaluation.
You should begin shopping for homeowner insurance during your inspection period to discover the price of the policy and insurability of the home. If a property has had numerous claims by previous owners, the annual premium could be considerably higher than a home without any prior losses.
Too many claims may make itdifficult to insure the property at a reasonable price, if at all.
While price is important consideration when purchasing homeowner insurance, coverage is equally so, and unless these are explained, you won’t know where your protection begins and ends. Does the policy include replacement cost and loss of use? Does it adequately protect you from a visitor’s “slip and fall” accident? What items or events are excluded from coverage? What is the “sweet spot” between premium paid and your deductible? You should have answers to these questions and many others to make your best homeowner insurance decision. Since many companies offer discounts when they insure both your home and auto, it’s wise to contact your present agent for details, and inquire further for professional and affiliation discounts.
As part of the escrow process the first year’s insurance premium is due in full at closing and will be included as a closing cost on your HUD-1 Settlement Statement. Moving forward, payment of the policy is included in your monthly mortgage, as part of the full PITI (principal, interest, taxes, insurance) payment.
Note: Your mortgage company will not require the purchase of homeowner insurance if the property is part of a Homeowner Association which has a current "blanket" policy insuring the buildings and common elements of the community and/or subdivision – as would be the case with most condominiums. Your proportional payment of this policy is included in your association fee. In this scenario your personal property is not insured under the blanket. As such, you may wish to obtain additional coverage (renter insurance) with liability protection.