If you’re wondering what types of insurance you need when buying a home, Primary residential Mortgage is here to help! There are a few types of insurance that are vital, and others are nice but not mandatory. To help you understand the difference, here’s a summary of the types of insurance you’ll likely need when buying a home.
Title insurance is required by your home mortgage lender when you get a home loan. If you’re paying all-cash, you have the option of skipping on title insurance, but you shouldn’t. Title insurance safeguards both the lender and the homebuyer’s financial interests in the home. It protects against loss due to title defects, liens, or other unforeseen matters. Title insurance is t’s especially crucial in transactions like short sales and foreclosures, which often carry the high risk of some tax lien being attached to the property.
Homeowner’s insurance is also mandatory when you’re getting a home loan. Homeowners insurance covers you for a variety of things, such as fires and theft. You’ll want it even if you aren’t legally required to have it.
Like it or not, things often get broken during moving, especially if someone else is handling your belongings. Basic, federally mandated moving insurance provides just 60 cents per pound of an item and is known as “released value protection.” Therefore, if something breaks and that’s the only coverage you have, you won’t get back the full value of the item, just what’s calculated under the coverage limits.
Full-value protection is a better idea. You can purchase it from the moving company, but you need to specify the items that are worth more than $100 per pound. The moving company can choose to repair the item back to its original state or give you the fair market value for it.
Flood insurance is a little tricky. The requirement for flood insurance can be mandatory for certain homes in flood-prone regions. Otherwise, it’s optional. The biggest problem with flood insurance is that often you don’t know you need it until it’s too late. If you are not in a designated flooding area, it’s still wise to get flood insurance, and typically it’s pretty affordable.
Typically, for most loans, private mortgage insurance is required if you don’t have a 20% down payment. If you can put down at least 20%, then you can avoid paying PMI. Mortgage insurance benefits only the lender. It does nothing for you, so try to get rid of it or avoid it if possible.
Sometimes it might feel a little painful to sign that check for one of these types of insurance. Still, just like you’re relieved when you get in a car accident and your car insurance covers it, the day may come that you’re grateful you had homeowners or title insurance. If you have questions about any of these types of insurance you need when buying a home, give us a call. Primary Residential Mortgage is always at your service.
Note: Opinions expressed are solely my own and do not express the views of my employer