Types of Insurance You Need as a Soon-To-Be Homeowner

Buying a home the first time can be very exciting. It’s like the ultimate pat on the back but a thousand times more rewarding, especially when you’ve worked so hard for it. While purchasing a house doesn’t have to be done in full cash, there are still a lot of expenses that you need to prepare for on top of your monthly mortgage — earnest money, deposit, buyer’s closing costs, maintenance, property taxes, and yes insurance.

Are you ready? Here are the most common home insurances that you should brush up on when deciding to buy a house in Georgia.

Homeowner’s Insurance

Also known as “home insurance,” a homeowner’s insurance protects you from the liabilities of structural damages, theft, and damages caused by you to other houses. For example, in the event that a natural disaster (hurricanes, lightning, earthquakes, flood, storm, etc.) and a man-made disaster (vandalism, break-ins, etc.) damages any part of your house, your homeowner’s insurance will compensate you for the costs. 

You can avail of a policy that either gives the actual cash value, covers the replacement cost, or covers an extended replacement cost — and these vary based on the type of your homeowner’s insurance.

damages covered by homeowners' insurance
Source: Ever Quote

Additionally, a homeowner’s insurance doesn’t only cover the structural damages of the house. If you want to insure all your appliances, furniture, and other personal belongings, you can also do so.  In some cases where the objects are too expensive, insurance companies itemize the pieces in the policy.

Private Mortgage Insurance

If you’re using a loan to buy your house and your downpayment is less than 20% of the home’s value, your lender will most likely ask for a private mortgage insurance (PMI). This is to ensure that you will be able to pay your mortgage even if you weren’t able to afford the 20% downpayment.

If the thought of paying additional for a private mortgage insurance terrifies you, don’t worry because you can always cancel it once you satisfy your lender’s conditions. Usually, these conditions include paying down the mortgage to less than 80% of the home’s value and not being late at paying your mortgage within a year or two of your PMI cancellation request. Yes, you may have to wait for two years before the insurance is completely canceled.

Title Insurance

A title insurance is obtained during the closing phase. This is to cover either you or your lender from any liability concerning your new property’s title. There are two types of policies under a title insurance: the lender’s policy and your (the owner’s) policy.

If you purchased your home through a loan, the lender would require you to pay for a lender’s policy during closing. This protects their investment in case the title is challenged after the purchase. On the other hand, the owner’s policy is optional but highly recommended. In case someone makes a claim against your home, your investment will not be put at risk.

Flood Insurance

If your area is recognized by the Federal Emergency Management Agency (FEMA) as a Special Flood Hazard Area (SFHA), a flood insurance will be required of you. As the name suggests, a flood insurance will cover the cost of damage brought about by flooding. 

Several factors may cause flooding. If your new home is located in an area near a dam, a lake, or a coastal area, you may want to consider getting flood insurance even if your place is not identified as an SFHA. You can also refer to the Georgia Department of Natural Resources Flood Map to see whether you are in a vulnerable area.  

Legal Insurance

Buying a house can come with a lot of risks — boundary disputes, issues with contractors and service providers, risky house conditions that the original owner failed to disclose, and many more. When any of these happen, you will need legal counsel to help you navigate the issue. This is when legal insurance becomes most useful.

Real estate agents are not licensed to give legal advice. That’s why real estate attorneys are also hired to make sure that the real estate transaction is not violating any laws. In the event that an unexpected legal issue comes up during or after your purchase of a property, you can have someone to consult with right away without worrying too much about the expenses.

Home Builder Warranty

This is applicable to home buyers who will become the first occupants of a newly constructed house. If the builder fails to do their job correctly, puts your family at risk, but doesn’t come back to make the necessary repairs, a home builder warranty will handle the job.

This type of insurance is purchased from a third-party warranty firm and covers expenses related to plumbing, electrical, and structural defects, to name a few. This is also useful in case your home has defects, but your home builder went out of business and is unable to provide you with the necessary help.

If you are buying a home and are too overwhelmed with the insurance policies you’ll need to get, HomeSold GA can help you. We’ve been helping home buyers purchase their Georgia homes with minimal inconveniences for years, and you can also experience that by contacting us at 770 668 4888.

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