Shopping For Homeowners Insurance On Home Purchase

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This BLOG On Shopping For Homeowners Insurance Was UPDATED And PUBLISHED On March 13th, 2020

What does shopping mean for homeowners Insurance when buying a home

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
  • This will cost more than double the premium

In this article, we will discuss and cover Shopping For Homeowners Insurance On Home Purchase.

Comparing Insurance Coverages Versus Premiums

It is highly recommended that a home buyer does shopping for homeowners insurance and compare coverage and premium.

  • Homeowners insurance premiums vary from one insurance carrier to another
  • One of the mandatory items home buyers need when buying a new home is homeowners insurance
  • Lenders will require a minimum coverage amount to cover the 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

What are purchases for homeowners Insurance for the best bonus

Homebuyers 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
  • Homebuyers 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 the homeowners’ insurance premium and two months of property taxes are escrowed (also called pre-paid) on all government loans and Conventional Loans with less than 20% equity
  • Homebuyers 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
  • This is 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

Brokers 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

Homebuyers 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 access to multiple insurance companies with the most coverage at competitive rates.

Shopping For Homeowners Insurance With High Debt To Income Ratio

What are purchases for home insurers with a high debt-to-income ratio

Shopping for homeowners insurance premiums can save you a lot of money. There are instances where borrowers have a 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 advises 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 policyholders 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.

2020 Update

This mortgage blog post article on Homeowners Insurance was updated on March 13th, 2020.

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