not insurance for homes. You were previously aware of that. I am referring to the other types of insurance that are not discussed until you are deep in escrow and searching for information online at midnight, such as “what is title insurance?”
Here’s the real deal on the lesser-known house insurance options that every first-time buyer needs to be aware of, along with the reasons why they are important.
1.Title Insurance (also known as Historical Protection)
As soon as I signed the offer letter, I believed I had the house. It turns out that a property has an entire history, and occasionally that history is messy.
If someone later claims ownership of your new home because of unpaid taxes, liens, faked signatures, or clerical errors from years before, title insurance will protect you. In essence, it is insurance against the ghosts of former homeowners.
It is often purchased at closing and remains with you for the duration of your home ownership. Although it is not always required by law, it is one of those things you will be quite happy to have in case something goes wrong.
2.PMI, or private mortgage insurance
Your lender will probably require private mortgage insurance (PMI) if your down payment is less than 20%. In the unlikely event that you do not make your loan payments, this one protects them, not you.
It will be deducted from your monthly mortgage payment. The good news?
The majority of people do not account for PMI when making budgetary decisions. I didn’t. Take a lesson from me.
3.Flood Insurance, Despite Being “Out of a Flood Zone”
The unexpected fact is that flood damage is not covered by homeowners insurance. Not at all.
Check out FEMA’s flood maps or, even better, speak with your neighbors if your lender does not mandate flood insurance. Too many people have told me about “100-year floods” occurring twice in a ten-year period.
If you are not in a high-risk area, flood insurance is frequently affordable and can end up saving you tens of thousands of dollars.
4.Insurance for Sinkholes, Earthquakes, and Other “Act of God”
The following natural disasters may not be covered by your regular policy, depending on where you live:
California, hello, earthquakes
Sinkholes (Florida, look at you)
Landslides or wildfires (which are becoming more of an issue in many states)
Until my agent politely inquired, “Have you considered a catastrophe rider?” I was clueless.
It is worthwhile to inquire. There are risks in every sector. When the ground has literally opened up beneath your foundation, it is the worst time to discover you are not covered.
5.Coverage for Sewer and Service Line Backups
Put this one under “essential but gross.”
Many homeowners are unaware that you, not the city, are accountable if the sewer line connecting your property to the street backs up or breaks. And how much would it cost to repair and excavate your yard? $5,000 to $10,000 is easy.
It may only cost $30 to $50 per year to add a sewer backup endorsement or service line rider to your policy.
6.Insurance vs. Home Warranty (Yes, they are distinct.)
Although it is sometimes sold alongside insurance, a house warranty is not technically insurance, and people frequently mistake the two.
Your HVAC, refrigerator, water heater, and other systems are covered by a guarantee in the event that they malfunction as a result of regular wear and use.
When the dishwasher gave up on life, I utilized the one that was included in my closing deal inside the first month. Worth it.
Conclusion: The True Price of Ignorance
Nobody takes the time to explain to you what insurance actually entails when you purchase a property. You either assume you already know it, it is mentioned in passing, or it is hidden in documents. However, you don’t. And that is all right.
Purchasing your first house is a significant life milestone, and safeguarding it requires more than just fundamental considerations.Consider the following before you paint the walls, start your first garden, or move in: What could go wrong? In a “I am ready for this” manner, not a gloomy one.
