How to Shop for Homeowners Insurance When Buying a Home
All mortgage lenders require your to have homeowners insurance.
- You choose your insurance company.
- You are responsible for comparing premiums and selecting coverage.
- Lenders have minimum coverage requirement to protect their interest in your property.
If you fail to keep your home insured while you have a mortgage, the lender can purchase forced place insurance. The premiums are very high, at least twice as high and normal coverage. And you’ll have to pay for it until you re-establish your own coverage.
Comparing Insurance Coverage
When you shop for homeowners insurance, compare premiums and coverage.
Homeowners insurance premiums vary from one insurance carrier to another. You’ll need at least the minimum lender-required coverage, but you may want additional coverage. Homeowners insurance protects you from liability if someone gets hurt on your property, and loss or damage of personal items –in some cases even if the property is not at home when damaged.
Shopping for Homeowners Insurance
Homebuyers who have an executed home purchase real estate contract will need to start shopping for homeowners insurance. Lenders to see the homeowners’ insurance declaration page and invoice before drawing your loan documents.
You do not have to pay for homeowners insurance upfront. The annual premium is included in your closing costs, however.
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
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.