Why are you talking about insurance I want to buy a home? Why would I need insurance? What kind of insurance will I need to purchase a home? Great questions. You will need at a minimum two types of insurance 1. title insurance and 2. homeowners insurance.
Title insurance came about in great part because of a deficiency in U.S. land records. In a recording system, each time there is a transfer of land title, the transfer is recorded with a local government recorder located usually in the county where the land lies. It then gets filed under the name of the grantor and grantee so it can be found and examined by anyone who wants to see it. Failure by the grantee to record the transfer makes it so future purchasers of the property don’t know of its existence. The recorders’ office has to determine who owns title by examining the files, using rules established by the state legislature and courts. If there is a disagreement on who owns title then the final decision will have to be made by the courts.
Title insurance is insurance against a financial loss due to problems in title and also invalid mortgage liens. It protects the buyer or lenders financial interests in the property from financial loss due to problems in the title. Title insurance will protect your interest by defending against a lawsuit that attacks the title.
It is important that you have title insurance as there may be liens on the property from not paying taxes or some other reason which means that the person selling you the house does not have a clear title on the property. Also, if you are taking out a loan to purchase the property from a financial institution then it will be required that you have title insurance. The financial institution will not risk lending you that money without title insurance.
Most home insurance policies will cover 5 major items: Dwelling Coverage, Personal Possessions, Loss of Use, Personal Liability and Medial Expense.
Dwelling Coverage - This is coverage against a structure, building a place where you dwell. As an example if you have $150,000 of coverage to cover your dwelling and your home burns down then you'll be able to rebuild it up to $150,000 depending on the specifics in the policy.
Personal Possessions - This coverage is usually some percentage of the Dwelling Coverage. As an example if that fire burned your home down and you had $112,500 of personal property coverage then you would be able to replace your belongings up to $112,500 depending on the specifics of the policy.
Loss of Use - This coverage covers you while you are burdened and unable to use the property. Many companies will pay for the actual loss sustained up to 12 months. As an example if your mortgage was $1500/month and as a result of your home burning down you had to live out of a Hotel for $2500/month then the insurance company will pay the extra cost involved because of the loss. Every policy is different so make sure to check with a competent professional about your policy and the limitations and exclusions.
Personal Liability - This coverage covers your family's personal liability in the event of an accident. As an example if you are playing tennis and you smash a ball into your opponents eye and they go blind and sue you for losses, then your personal liability policy will cover it. Again make sure to consult professionals about your specific policy.
Medical Expense - This coverage is for little things that occur on your premises to others. As an example, if you have a friend over they trip and fall and bang their head and need stitches. This portion of the policy could cover minor medical expenses. Check your policy details and the limitations and exclusions as it relates to medical expense.
Most of the basic coverages of a homeowners policy include things like coverage against most major perils such as: fire, wind, hail, theft, vandalism, explosion, riot, aircraft, smoke, sudden and accidental damage, storm, lightning, volcanic eruption. Earthquakes can be covered for additional cost. Flood plains can be covered for additional costs. Expensive jewelry, antiques can all be covered for an additional cost.
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