If you take out a mortgage, your lender will require you to have homeowners insurance before it will release the money for you to buy your house. Sometimes borrowers don’t know that they have the right to choose a homeowners insurance company, or they want to avoid the hassle of shopping around.
If you don’t purchase a policy on your own, your lender might go ahead and obtain a policy on your behalf through an insurer that it partners with. No matter who chooses a company to insure your property, you, as the homeowner, will be responsible for paying the premiums.
Why Your Lender Will Require You to Have Homeowners Insurance
When a lender approves a mortgage application, it’s taking a risk. The lender wants to be sure that the property will be covered by insurance in case it gets damaged by a storm, a fire, or another peril. Mortgage lenders therefore require borrowers to obtain homeowners insurance and keep it for as long as they have a loan.
Why You Should Get Your Own Insurance Policy
Insurers offer policies with a variety of coverage limits. Your mortgage lender won’t know how much coverage you need. A policy that your lender obtains for you might not have enough coverage for all of your belongings, or it might have a limit in a particular category that isn’t high enough to adequately protect you.
If you have valuable artwork or jewelry, for example, you might have to purchase an endorsement to get the level of coverage that you need. That will cost a bit extra, but it can protect you from a steep financial loss.
Homeowners insurance premiums differ from one company to another. If you request quotes from several insurers for policies with the exact same types and amounts of coverage, you will probably get a wide range of quotes. Taking a little time to explore your options might save you several hundred dollars per year.
You might qualify for a discount if you bundle your homeowners and other insurance. For instance, many customers get discounts when they purchase homeowners and auto insurance policies from the same company.
When you request quotes, you’ll get to choose from a range of deductibles. The deductible that you select will influence your rates. A policy with a higher deductible will generally have lower premiums than a policy with a lower deductible.
Get Quotes from Several Insurers
Your lender will require you to have homeowners insurance coverage, but it won’t care which company insures the property. It’s in your best interest to shop around so you get the right coverage at a price that you can afford. Start contacting insurers a few weeks before closing so you’ll have enough time to figure out how much coverage you need and compare quotes.
