A Homeowners Insurance Policy Overview
Answers to some frequently asked questions about homeowners insurance requirements
Like other forms of insurance coverage, homeowners insurance is easily taken for granted, at least until it's needed. Then in the unfortunate event of a fire, accident, theft, or some other unexpected occurrence, you'll be glad you have it. After all, your home is by far your largest lifelong investment. If it's left unprotected through inadequate or non-existent insurance coverage, you are gambling with your net worth.
In addition to covering the structure of your home and its contents, homeowners insurance also protects you from liability incurred if an accident takes place on your property. Here are a few frequently asked questions about homeowners insurance.
Homeowners insurance FAQs
Q: Is homeowners insurance really necessary?
A: Virtually all lenders will require you as the borrower to secure a homeowners insurance policy with replacement coverage. If your insurance coverage lapses, a lender will generally purchase coverage for you and pass along the cost. In the event this occurs, it is likely that their selected coverage will be more expensive than the coverage you could have secured on your own. After you've paid off your mortgage, you're certainly free to drop insurance coverage, but it would be extremely unwise to do so.
Q: Do the requirements of homeowners insurance mandate that I get my homeowners insurance from the same place as my other insurance, like auto and life?
A: No, you're free to shop around for the best rates and terms on homeowners insurance coverage and select any carrier you prefer (though consumer experts counsel it should be from carriers that have achieved high ratings from industry watchdogs). But, many insurers will offer discounts and other inducements on so-called umbrella policies, which cover home, auto and life together. Ask your carrier about potential savings before making a decision.
Q: Should my homeowners insurance coverage level be tied to the current market value of my home?
A: No, your homeowners insurance policy should be tied to the "replacement cost" of your home. The replacement cost is the amount it would cost to replace the entire house, its contents, and related structures (such as fences and tool sheds) in the event of a total loss. The replacement value is generally higher than the market value.
Q: How does homeowners insurance affect my mortgage payment?
A: Most borrowers will choose to pay their home insurance through an escrow account. The lender includes a pro-rated portion of the insurance premium in the monthly mortgage payment and remits the premium to the insurance carrier when it's due each month. Using escrow to pay insurance is a great way to manage your budget, automate payments and ensure there will never be a lapse in coverage.
Q: How is the cost of homeowners insurance determined?
A: The cost is based on factors including the age and condition of your home, the claims history for your area, your personal claims history (insurers maintain national claims databases), and the extent to which your house includes such high-risk items as pools or trampolines.
Q: How do I file a claim, and when do homeowners insurance requirements state that I need to submit a claim?
A: Most insurers will require you to contact them (or your agent) as soon as possible after a claim-worthy event. You'll be asked to file formal claims documents with a claims adjuster, who may visit your home. You may also be asked to take such actions as boarding up windows or taking other temporary steps to prevent further damage.
Apply for a mortgage with Citizens Bank
Choosing the right mortgage lender is as important as choosing the right homeowners insurance provider. You can learn more about Citizens Bank mortgage rates and options or start the mortgage application process online. For additional information, contact a Home Loan Orignator at 1-888-514-2300.