Home Insurance Coverage – Making the decision to purchase a home can be extremely stressful, especially when you consider the huge financial commitment you are about to take on. In addition to all of the new responsibilities you take on, you also have to factor in home owners insurance.
Having insurance is a key component to protecting your home or property against financial loss. There are many types of home insurance coverage options for you to choose from, some of them include:
– Property insurance
– Private mortgage insurance
– Title insurance
Property Insurance Coverage
Property insurance usually involves insurance companies covering the costs associated with disaster recovery in exchange for monthly premium payments from you. Having property insurance typically means that you have protection against things such as fires, theft and other types of damage or destruction that may result from bad weather.
Your home or property can generally be insured in two ways; open perils or named perils.
Open perils for property insurance usually covers against losses that are not particularly excluded in your plan, such as damages caused by natural disasters; earthquakes, floods or from nuclear incidents, acts of terrorism and war.
Named perils on the other hand, work somewhat differently. They require the causes of loss your property may suffer to be included in your policy; otherwise they are simply not covered.
Some examples of the types of losses that named perils do provide coverage for include fires, lightning, and burglary. It’s also important to remember that in most states, homeowners insurance is required by lenders when you purchase a home or property.
Private Mortgage Insurance – Why you may need it
In most cases, private mortgage insurance or PMI, as it is often referred to, is specifically required if your down payment is 20 percent or less than the property’s valued or sale price. The primary purpose of private mortgage insurance is to provide protection for lenders in the event that new homeowners default on their home loans.
You may be wondering just why you would even need private mortgage insurance if it mainly benefits the lender, however if you truly think about it, you will discover that it could be beneficial to you as well.
This is mainly because private mortgage insurance can allow you to purchase a home with a smaller down payment. Therefore, even if you have limited funds, you may still be able to get into a home.
Private mortgage insurance can also help you qualify for home mortgage loans. The exact cost for private mortgage insurance is usually based on your mortgage loan and the payments you make every month.
Benefits of Title Insurance
Title insurance can be extremely beneficial to all parties involved in the purchase or sale of a home.
As a buyer, and specifically to the purchase of real estate property, it’s important to have some type of protection against financial loss that can result from a faulty title to the property purchased. In most cases, for a one-time premium payment, buyers can obtain the protection provided through a title insurance policy.
Title insurance policies usually cover claims that are brought about or discovered through public records and those that are not. In addition to providing protection for the insured owner, title insurance also extends to the insured person’s heirs for as long as they hold title to the property.
Most insurance companies will also work to satisfy any legitimate claims that are made against the insured’s title and will also pay for the costs associated with legal expenses for defending a title claim.