If you currently rent an apartment but are in the process of buying a house, your insurance needs will change when you make this move. In fact, you will need to buy home insurance for the house you are buying before you can even close on it and take ownership of it. Here are several things you should understand about the way home insurance works when buying a house.
You must bring proof of policy to your closing
The first thing to understand is that your mortgage lender will not allow you to close on the loan and take possession of the new home without an insurance policy in place. This is always a requirement when a lender is involved, and you will need to bring proof of insurance to your closing in order for the closing to take place. When you bring proof of insurance to the closing, your lender will have the information about your policy that they need, and they will monitor your policy for as long as you have a loan with them. Lenders do this for protection, and this is always a requirement.
You will probably have to prepay for a year
The second thing to know is that your lender will probably require that you prepay an entire year of home insurance before closing on the house. This, again, is done for protection purposes. If anything happens to your home, your insurance policy would pay your lender the amount you owe on the house, and this is how insurance protects lenders. If you do not pay your insurance company for the entire year upfront, you will probably have to pay the annual premium at the closing appointment for your house.
Your lender will most likely require an escrow account
The other thing to know is that your lender will probably require an escrow account for this. With an escrow account, you will pay a small portion of your home insurance costs to the lender each month. The lender places this money in an account called an escrow account. When the year ends and your home insurance premiums are due, the lender will pay them with the money in this account.
Buying a house is very different than renting an apartment, and one of the main differences is the insurance needs for each of these options. If you are getting ready to purchase a house and have not yet bought a home insurance policy, you should contact a homeowner's insurance company, such as State Farm Insurance: Kurt Riehl, today to get a quote for insurance coverage.