A: A lender will require you to buy insurance to protect your home, its contents, and any other buildings. Homeowner’s policies vary with restrictions and exclusions. Asking for replacement coverage, so you will receive the actual cost to replace the items rather than what you paid 10 years ago will help you in the case of an issue. Basic homeowners’ policy will include: Liability, property protection, and living expense coverage. You may also need mortgage insurance or title insurance. Be sure to check with several insurance agents about premiums and compare costs. Prices can vary company to company, but there are some helpful hints to keep in mind.
- Don’t take out a policy with a deductible under $500. Low deductibles raise your rates.
- Don’t buy earthquake insurance or other coverage unless you need it. One lender sold life insurance to borrowers who had no idea they were buying it and the Attorney General made them reimburse the borrowers.
- Subtract the value of the land from the value of the home and buy property insurance just for the value of the home itself. A lender requires you to carry insurance on your home, but not your land. After all, the house could burn down, but the land will survive.