When you buy a new home, your lender may ask you for an insurance quote, quite possibly in writing. This is because insurance is an important factor for lenders to calculate overall costs. Although it is one of the easiest parts of buying a home, there are some elements that can be confusing. The following tips will help you make sure everything goes smoothly in order to speed up the process.
Home Insurance Tips: Will you escrow your monthly insurance costs?
Usually you have the option to roll your insurance costs into your monthly mortgage payment (escrowed). It is important you find out whether this is the case as this will impact how your policy is paid. Similarly, some lenders allow you to include taxes along with the insurance. Other details to discuss with your agent are:
- Coverage Amounts
- Whether you want to schedule valuables
- Possible discount for other types of insurance such as auto insurance
Schedule a Closing Date: Your mortgage lend will require proof of insurance
In order to schedule a closing date, your lender will require proof of insurance coverage, and they tend to push purchasers to produce this as soon as they’re ready to close. Proof of coverage can be in the form of an Insurance Binder or Evidence of Property Insurance. You, your lender, and your lawyer all need a copy of this document. The following criteria is what typically needs to be included in the policy and appear on the insurance document:
- Full replacement cost coverage on the property. Dwelling coverage need not be the same as the loan amount, but the lender needs to know that the home will be rebuilt as it was before the loss.
- The lender listed as additional insured. Simply ask your broker for the mortgagee clause.
- A full annual policy term.
- The annual premium paid in full, even if it is escrow billed.
At this point, your lender should be able to set a closing date. Try to receive as firm a closing date as possible as if the date becomes pushed back, you will have purchased insurance on a property you are yet to own. Shortly after the policy is issued, the insurance company will complete a home inspection to verify the coverage.
A Note on Renters Insurance
If you are currently renting or have a child that will be soon, you can protect yourself or them, by purchasing renters insurance. This is a great step for proper financial planning.
At George A. Bell & Son, we would be happy to deal with your mortgage broker and lawyer directly to give you confidence that things are going ahead as planned. We want to ensure the insurance process is easy as possible for you, to make it one less thing for you to worry about. Contact us today to find out more about how we can help you!