4. Do I need home insurance to complete my real estate deal?
In order to finalize a mortgage, home buyers must present proof of homeowners’ insurance. This type of insurance is required because lenders need to protect their interests in case a fire, natural disaster, accident or some other event damages or destroys the home, either before or after the sale closes. Before issuing home insurance, an insurance provider may order a property assessment to evaluate to overall health of the home.
While buyers should budget about $50 per month for homeowners’ insurance, actual rates vary and are dependent on factors including:
- The total amount of coverage provided by the policy
- Home safety and security features
- The home’s location and its distance from the nearest fire station
- The age of the home
- The condition of the home
- The type of electrical system in the home
- Whether or not the home has a swimming pool
It is necessary to carefully read and completely understand the terms and conditions associated with a homeowners’ insurance policy. Homeowners may be required to report certain changes in their living situations to the insurance company in order to maintain continual coverage. Failure to report such items to the insurance company could result in the invalidation of a claim, if one ever needs to be made. Examples of such changes include the construction of an in-ground swimming pool, the conversion of a home to include rental apartments, certain types of home improvement projects, and the addition of new occupants.
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