5 types of insurance every homeowner needs

5 types of insurance every homeowner needs

Are you in the process of buying a house? You may learn that insurance is one of your bank or lender’s requirements for securing a home loan. But what kind of insurance do you need? There are actually a few types of insurance you might need when you buy a home. Check out the different kinds to make sure you’re covered. In this article, we discuss 5 types of insurance every homeowner needs.

5 types of insurance every homeowner needs

Protecting your most important assets is an important step in helping you safeguard your possessions. To help you make an informed decision, you should be familiar with the different types of home insurance available to you.

1. Homeowner’s insurance

Most lenders will require you to have homeowner’s insurance. If you have a mortgage loan, the mortgage holder is also made an insured on the policy to ensure its investment is protected in the event of serious or total damage. Homeowners insurance is a type of property insurance that protects a person’s home and personal belongings from loss and damage. It also serves as liability insurance in the event of an accident at home or at the hands of the homeowner within the policy’s coverage area. Look for a policy that covers the replacement of the building and belongings, as well as the cost of living someplace else while your home is being repaired.

2. Private mortgage insurance

A borrower may be forced to purchase private mortgage insurance (PMI) as a condition of obtaining a traditional mortgage loan. If your down payment is less than 20%, your lender will generally require you to obtain private mortgage insurance. Unlike most types of insurance, the policy protects the lender’s investment in the home. Private mortgage insurance gives your lender confidence that you can afford your mortgage despite a lower down payment.

3. Title insurance

So what exactly is title insurance? Title insurance is a type of indemnity insurance that protects lenders and homebuyers against financial loss caused by faults in a property’s title. The most common type of title insurance is lender’s title insurance, which the borrower purchases to protect the lender. The other type is owner’s title insurance, which is often paid for by the seller to protect the buyer’s equity in the property. Title insurance protects both lenders and homebuyers against loss or damage occurring from liens, encumbrances, or defects in the title or actual ownership of a property.

4. Flood insurance

Flood insurance is a type of property insurance that covers a dwelling for losses sustained by water damage specifically due to flooding. This type of insurance functions similarly to other types of insurance. The insured pays an annual premium based on the flood risk of the property and the deductible they select. Keep in mind that if your home is flooded, your standard homeowner’s insurance is unlikely to cover the resulting losses.

5. Legal insurance

Purchasing a new house can bring with it a slew of legal and financial issues. Issues can range from property line disputes, issues with the contractor in charge of your remodelling, or fights with service providers. Legal insurance gives you access to experts who can assist you in resolving your legal problems.

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