Home Owner's Insurance

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What is this and why do I need extra insurance? - By Ken Boyd

Unless you are paying cash for a home, you will have home owner's insurance. And if you are sharp enough to have gathered enough money to pay cash, you are probably smart enough to know you need to protect your investment. Insurance is for you and the lender. If there is significant damage to your home, the insurance is there to protect you and the lender, depending on the conditions of the damage. As long as you have a mortgage, the lender will keep up with the fact that your home is insured. The lender's method is to have accumulated money from you in an escrow account.

An escrow account is kept by the lender. Upon purchase of your home, you will put money into the account to cover payments usually for 1 year. Then, your future mortgage payment will include 1/12 the cost of the insurance.This way, there will always be funding in the account to cover the cost of insurance. The lender will make the payments on an annual basis to the insurance company, making sure their investment, and yours, is fully covered. Like car insurance, the cost depends on variables such as the home value,deductible, type of structure, age, location,etc. Some homes cost more to insure.Some homes have been "tagged" as high risks if previous owners have made numerous claims. A log home, for example, cost more to repair than a typical structure in the event of a fire. Being a distance from a municipality fire department adds to the cost, or having a pool that needs increased liability coverage. So if you want high insurance, buy a log home out in the country and add a pool.Talk about a tough resale!

You have the right to shop prices and determine the insurance company to be used.If you use the same company as your car insurance, usually a discount is offered.