|8. Get Insurance
Steps to Home Ownership!
No one would drive a car without insurance, so it figures
that no homeowner should be without insurance.
The essential idea behind various forms of real estate
insurance is to protect owners in the event of catastrophe. If
something goes wrong, insurance can be the bargain of a
What kind and how much?
There are various forms of insurance associated with home
ownership, including these major types:
Title insurance: Purchased with a one-time fee at
closing, title insurance protects owners in the event that title
to the property is found to be invalid. Coverage includes
"lenders" policies, which protect buyers up to the mortgage
value of the property, and "owners" coverage, which protects
owners up to the purchase price. In other words, "owners"
coverage protects both the mortgage amount and the value of the
Homeowners' insurance provides fire, theft and
liability coverage. Homeowners' policies are required by lenders
and often cover a surprising number of items, including in some
cases such property as wedding rings, furniture and home office
Flood insurance: Generally required in high-risk
flood-prone areas, this insurance is issued by the federal
government and provides as much as $250,000 in coverage for a
single-family home plus $100,000 for contents.
Home warranties With new homes, buyers want assurance
that if something goes wrong after completion the builder will
be there to make repairs. But what if the builder refuses to do
the work or goes out of business?
Home warranties bought from third parties by home builders
are generally designed to provide several forms of protection:
workmanship for the first year, mechanical problems such as
plumbing and wiring for the first two years, and structural
defects for up to 10 years.
Home warranties for existing homes are typically one-year
service agreements purchased by sellers. In the event of a
covered defect or breakdown, the warranty firm will step in and
make the repair or cover its cost.
Insurance policies and warranties have limitations and
individual programs have different levels of coverage,
deductibles and costs. For details, speak with REALTORS®,
insurance brokers and home builders.
Where to look.
REALTORS® often provide home insurance and such policies are
also available from insurance brokers.
How do you get insurance?
The time to obtain insurance and warranty coverage is at
closing, so speak with a insurance broker prior to
closing. Be sure to ask about limitations, costs, deductibles
and "endorsements" (additional forms of coverage that may be