If you take out a mortgage, your lender will require you to have home insurance before releasing the money to buy your home. Sometimes borrowers don’t know they have the right to choose a home insurance company, or they want to avoid the hassle of shopping around.
If you don’t take out a policy on your own, your lender might go ahead and get a policy in your name through an insurer they partner with. Regardless of who chooses a company to insure your property, you, as the owner, will be responsible for paying the premiums.
Why your lender will require you to have home insurance
When a lender approves a mortgage application, they are taking a risk. The lender wants to be sure that the property will be covered by insurance in case it is damaged by a storm, fire or other peril. Mortgage lenders therefore require borrowers to purchase home insurance and keep it for as long as they have a loan.
Why should you get your own insurance policy
Insurers offer policies with a variety of coverage limits. Your mortgage lender will not know what coverage you need. A policy your lender obtains for you might not have enough coverage for all of your belongings, or it might have a limit in a particular class that isn’t high enough to adequately protect you.
If you have valuable artwork or jewelry, for example, you may need to purchase a rider to get the level of coverage you need. It will cost a little more, but it can protect you from significant financial loss.
Home insurance premiums differ from company to company. If you request quotes from multiple insurers for policies with the exact same types and amounts of coverage, you’ll likely get a wide range of quotes. Taking a little time to explore your options could save you several hundred dollars a year.
You may be eligible for a discount if you bundle your home and other insurance. For example, many customers get discounts when they buy home and auto insurance policies from the same company.
When requesting quotes, you can choose from a range of franchises. The deductible you select will influence your rates. A policy with a higher deductible will generally have lower premiums than a policy with a lower deductible.
Get quotes from multiple insurers
Your lender will require you to have home insurance, but they won’t care which company insures the property. It’s in your best interest to shop around for the right coverage at an affordable price. Start contacting insurers a few weeks before closing so you have plenty of time to determine the amount of coverage you need and compare quotes.