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As a homeowner, it is essential to safeguard your most valuable asset—your home. Unforeseen events such as natural disasters, theft, or accidents can be costly if you aren’t covered. Homeowner’s insurance offers the necessary protection, ensuring that you have peace of mind and can recover from unexpected incidents. But there is no “one-size-fits-all” homeowner’s insurance policy, and this could lead to a lot of questions.
We try to answer the most common questions below.
Is homeowner’s insurance required?
Most lenders and title companies will REQUIRE you have insurance on your home as part of your loan agreement.
Is homeowner’s insurance and private mortgage insurance the same?
No. Homeowner’s insurance covers the structure of your home and personal belongings. Private Mortgage Insurance (PMI) is a type of mortgage insurance that benefits your lender. You might be required to pay for PMI if your down payment is less than 20 percent of the property value and you have a conventional loan. You also may be required to pay an upfront and annual insurance premium that is required on loans backed by the Federal Housing Administration (FHA).
How is the cost of homeowner’s insurance determined?
The cost is typically determined by various factors, such as the location of your home, its age and construction type, the coverage you choose, and your credit score. Insurance companies will also consider risks specific to your area such as wildfires.
Are floods and earthquakes covered?
Typically, floods and earthquakes are NOT covered by standard homeowner’s insurance policies. And this does catch quite a few homeowners off guard every single year. You will likely need to purchase a separate policy that covers specific disasters such as earthquakes.
Where do I begin when shopping for homeowner’s insurance?
The best advice here is to ask for recommendations from friends, family, or even your Loan Originator. If you own a car, ask your insurance provider if they offer homeowner’s insurance. In some cases, bundling your homeowner’s insurance policy with other policies from the same insurer can help you save some money on your monthly premium.
Can I adjust the coverage limits on my homeowner’s insurance?
Absolutely. You can always adjust your policy to better suit your needs, especially if you are planning on making any major upgrades to your home. In fact, it is a good idea to review your policy with your insurer every single year.
What is a deductible for homeowner’s insurance?
The deductible is the amount you pay out of pocket before your insurance coverage kicks in. For example, if you have a $1,000 deductible and file a claim for some water damage that costs about $3,000 to repair, you would be responsible for paying the first $1,000, and your insurance would cover the remaining $2,000.
It is important to point out that homeowner’s insurance will cover the structure of the home and personal belongings in the event of a disaster, but it may not cover everything on your property. But be sure to read your policy very carefully. Damage caused by an irrigation line in your yard may not be covered, for example. This is why you should have a savings account set aside for your home for any repairs that may not be covered by insurance.
Equal Housing Opportunity. Axia Home Loans is a registered tradename of Axia Financial, LLC. NMLS 27830.