Your lender will want you to set up your homeowners insurance early in your transaction. At closing, the lender will fund your homeowners insurance escrow account. Your homeowners insurance payments will be made from this account over the next year. Some insurers prefer to have you fill out a form, while others can process a quote over the phone. Expect to be on the phone for at least 30 minutes. Related Reading: Steps to Buy a Home.
Tips for Selecting Homeowners Insurance:
- Start by calling the company you use for your car insurance. Most likely you’ll get a discount for bundling your home and auto insurance together.
- Get quotes from a few different companies. It takes extra time, but rates can vary widely.
- Have the HOA documents, including insurance rider or package, ready if you are purchasing a townhome or condo. Coverage varies from association to association. The HOA insurance binder will tell your insurance company what exactly is covered through the HOA and what coverage you need to purchase. Getting an HO6 insurance with loss assessment will be important to keep your deductible low in case of an insurance claim.
- If you are purchasing a single family home, consider including foundation demolition in your insurance in case of fire. It will be an extra cost, but we have had our share of wildfires in Colorado Springs.
- Consider a sewer back up insurance rider, especially if you have a basement. Coverage for this event is typically not automatically included in homeowners insurance.
- You’ll need to purchase flood insurance if you are in a flood zone. This could easily throw you over you monthly payment budget. Ideally, I want you to learn early in the process if your home is in a flood zone.
- For the best coverage, get a replacement cost homeowners insurance policy. It will pay your claim according to the value of replacing or repairing your home. As always, talk to your insurance professional to make sure this is the right insurance for you.
- If you have several properties or vehicles (cars, campers, motorcycle), consider an umbrella insurance policy for additional coverage and to tie it all together.
Once you have selected your homeowners insurance policy, pass the information to your lender and they will coordinate the details for closing.