Shopping For Homeowners Insurance On Home Purchase

This BLOG On Shopping For Homeowners Insurance  Was UPDATED On June 1, 2017

All lenders will require homeowners insurance. Homeowners decide on what insurance company they want their homes insured. It is the homeowners responsibility in shopping for homeowners insurance. In the event if the lender finds out that the property is not insured, the lender will forced place homeowners insurance on the property they have a lien on which will cost more than double the premium. It is highly recommended that home buyer do shopping for homeowners insurance and compare coverage and premium.

  • Homeowners insurance premiums varies from one insurance carrier to another.
  • One of the mandatory items home buyers need when buying a new home is homeowners insurance. 
  • Mortgage lenders will require a minimum coverage amount to cover loss if the home were to get destroyed.
  • Homeowners  should explore insuring their property beyond the minimum coverage in the event of a disaster.
  • There are many different types of homeowners insurance coverage.

Shopping For Homeowners Insurance For Best Premium

Home buyers who have an executed home purchase real estate contract will need to start shopping for homeowners insurance.

  • Lenders will need to see the homeowners insurance declaration page and invoice for the year.
  • Home buyers do not have to pay for homeowners insurance upfront but they do need the dec page of the insurance policy plus invoice.
  • One year’s homeowners insurance premium needs to be paid upfront at the time of the home closing.
  • Two months of homeowners insurance premium and two months of property taxes are escrowed (also called pre-paids) on all government loans and Conventional Loans with less than 20% equity.
  • Home buyers might get a quote from Allstate Insurance and one from State Farm Insurance but the premium might be different from one to another and so will the coverage. 
  • Consulting with an insurance broker who specializes in homeowner insurance is highly recommended because a broker can shop for the best coverage and lowest insurance premium for the homeowner.
  • An insurance broker has access to multiple insurance carriers and can shop with the insurance carrier that has the best coverage and rate in the geographical region of the subject property.

Homeowners Insurance Premiums Vary from Company to Company

Home buyers should get several quotes when shopping for homeowners insurance. There are captive insurance companies like State Farm, Allstate, and Farmers where these agents can only sell their own products. However, consulting with an insurance broker may be better because insurance brokers are not just tied to one insurance carrier and have a network of insurance carriers where they can have better pricing.

  • Captive insurance agents can only sell the products their insurance company offers and normally cannot broker out to other insurance carriers. 
  • Maybe Allstate Insurance’s premium might be the highest in the area you need homeowners insurance versus other insurance carriers. 
  • However, consulting with an experienced insurance broker may open accessibility to multiple insurance companies with the most coverage at competitive rates.

Shopping For Homeowners Insurance With High Debt To Income Ratio

Shopping for homeowners insurance premiums can save you a lot of money. There are instances where borrowers have higher debt to income ratios where they need to lower their monthly expenses. Homeowners insurance is part of P.I.T.I. (Principal, Interest, Taxes, Insurance). One of the areas loan officers advise borrowers who need to lower their debt to income ratios is homeowners insurance. There are cases where I have seen borrowers lower their monthly homeowners insurance premium by $50,00 per month just by shopping for homeowners insurance.

  • The key is the most coverage possible with the least amount of insurance premium. 
  • Make sure there is plenty of content coverage as well as the minimum coverage required by the lender. 
  • Many insurance companies will offer volume or package family discounts on insurance premiums for policy holders who have all of their insurance such as car and health insurance along with their homeowners insurance. 
  • For example, policyholders combining their auto insurance, health, life insurance policies with their new homeowners insurance policy, the insurance carrier might offer a volume discount. 
  • Consult with an insurance broker about group discount premiums.

2017 Update

This mortgage blog post article on Homeowners Insurance was updated on June 1,, 2017.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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