What is Homeowners' Insurnace Why do you need it?

Homeowner's insurance

Unless you pay cash for your home, your lender will require proof of a homeowner's insurance policy, secured before closing. This policy protects your investment as well as the lender's. If you choose to have the lender escrow your insurance payment, then you need to pre-pay a full years premium in advance.  Here's a general overview of what homeowner's policies protect against.

Casualty: The most common hazard insured against is fire damage; however, your policy may cover losses due to other hazards (wind, hail, etc.). Be sure to determine precisely what is and isn't covered. If your home is built in a flood-prone area, you'll need a separate flood policy.  When an appraisal is done to acess the value of the home, the appraiser will also included the flood zone map for where the property sits and if it is in a flood zone or not.  The lender will also do a flood certification to determine if you will need flood insurance.

Liability: This protects you against lawsuits resulting from injuries to visitors or guests in your home. The cost for this coverage, to a large degree, is based on the limits (in dollars) of coverage.

Personal Property: While the casualty or hazard insurance covers the rebuilding of the house structure, personal property coverage protects what's inside the home. Coverage varies widely, so be clear on exactly what the limits of your coverage are. For example, does it cover replacement cost or original cost?  Typically if you are an investor, then you will not get personal property insurance because your tenets will get that themselves and it is called renters insurance.

John Thomas - Citizens Lending Group - Delaware Mortgage Loans