insurance For The First Time Home Buyer
Insurance For the First Time Home Buyer (Everything you need to know)
Buying your first home is an exciting milestone in life. Sometimes a stressful experience, it’s important to feel empowered in your purchasing decisions. Homeowner’s insurance may seem like another daunting task, but with a good insurance agent, it’s not. They should create ease for you throughout the process. When it comes to making the biggest purchase of your life, many questions arise so we’re here to clear up any confusion.
In order to de-mystify, on this page, you’ll find an infographic, insurance policy definitions, and the FAQs of many prospective home buyers out there. Based in Peabody/Danvers, MA, at Phil Richard Insurance, we’re here as an independent resource for you. If you have any questions, please don’t hesitate to reach out.
First Time Home Buyer Insurance Key Facts
Why do you need homeowner’s insurance?
To protect your assets and future income
Homeowners insurance can cover the structure of your home, detached structures, personal property, and protect you from liability exposures, such as injuries occurring on your property.
To start, you’ll either obtain a homeowners policy (HO3), or a condo unit owners policy (HO6) from an insurance agent. Your coverage is based on how much it would cost to replace or repair damaged property, and what kinds of risks are considered to be exposed. Each individual is unique, which is why insurance companies create additional coverages, known as endorsements, to customize the coverage to your individual needs. The needs of the area you live in are unique as well, so make sure to work with someone local.
To satisfy your mortgage lender at closing
Your mortgage lender will require you to have a binder reflecting the mortgage clause and adequate HO insurance coverage paid in full.
Is homeowners insurance required?
If you have a loan on your home, your lender will require you to have insurance.
Do I need flood insurance?
If your lender requires it, yes. It’s always recommended, and if it’s not required, you may still want it, depending on where you live. We can help you determine the true need if that’s your situation.
What kind of insurance do you need if you are buying a condo?
Master Policy (for the association – the shell of the building, common areas)
Each Condo Association’s Master Policy is different, your agent will analyze it for you and address your needs.
HO-6 policy (inside your unit)
Your condo policy will reference the coverage in your master policy. Sometimes terminology is referred to as “walls-in” or “studs-in” coverage, the needs of these policies depend on the condo association’s master insurance policy.
Meaning the interior of your unit, personal belongs/contents.
What do I need for insurance on closing?
In order for closing to go smoothly, you need to have a homeowners insurance policy. It must be paid in full directly to your agent before closing. From there, your agent provides a binder (proof) to your mortgage company showing all of the requirements have been fulfilled in time.
If your mortgage payments are in escrow, you still need to pay the premium in full for the first year before closing. Escrow payments will kick in for renewal.
What happens to my escrow insurance payments when my mortgage is sold?
Inform your agent as soon as possible. They’ll need to update your policy as well as their records. If you don’t, you run the risk of your insurance payments getting missed and your policy canceled, meaning no insurance coverage.
Can I obtain homeowners insurance online with a national carrier?
Yes, proceed with caution – issues can arise. We’ve seen situations more than once when clients have obtained insurance with a national online company, only to have something wrong with the policy, and the closing held up as a result. By the time they come to us, closing has been pushed back, and money wasted. Not to mention, they are frustrated and confused.
With a local, independent agency, they have multiple companies/carriers to quote your home with and more “authority,” meaning, you don’t go through as much red tape. Prices can be more competitive, especially with combined home & auto policies. More importantly, you are getting the advice you trust, and smooth sailing for the most important purchase of your life. Having the wrong coverage is like lighting money on fire – it won’t work for you when you need it.
Is it worth it to quote my car insurance with the homeowners?
Yes! If you don’t, you are missing out on a 99% guaranteed savings. This goes for any agent, anywhere – it’s almost always better to bundle policies. Companies want all of your insurance coverage under one roof and will incentivize you for it. Think it’s too much of a hassle to get both quotes at the same time? We always say, “if you don’t do it right the first time, when are you going to do it again?” You’re spending lots of money, so to truly maximize the value of your insurance coverage and cost, quote both policies together. Take advantage of any savings you can while it’s fresh on your mind.
I already purchased my first home and have insurance, but I suspect I may be underinsured and/or I want to switch agencies. Is it too late?
No, not at all. It’s never too late to add more coverage on to your existing policy (unless it’s flood insurance!), and you can switch insurance agents and carriers at any time (although, there are times it’s better to wait – check with your new agent and see what they say). If you move both policies, you may not need a down payment for either. If you want to switch your car insurance mid-term, you may have to pay a minimal short-rate fee.
I heard it costs more to work with an independent insurance agency, is that true?
No, definitely not! We hear this common misconception frequently. Working with agents like us is like choosing your local farmer’s market over Walmart. Often, we are saving our clients money upfront, empowering them as consumers with holistic options, and not to mention, a commitment to the community. Independent agents have no board of directors, hidden fees, or rate increases after 6 months.
The main thing that separates us independent agents and national insurance companies is their large, creative marketing budgets!
Down the road, when they have a loss, our clients are especially grateful to have a local team supporting them. Insurance is serious business – your policy is a legally binding contract – make sure it’s with a local professional you know and trust.
How do I find a good independent insurance agent?
- Support your local community and receive better service with a local agent (no it doesn’t cost more!).
- Direct, national writers have good rates at first, but fewer options, lower coverage, and less clout in the case of a claim.
- Ask for personal recommendations from your realtor, lawyer, banker, family & friends.
- Google insurance in your area, read the reviews and find someone you feel comfortable with.
Frequently Asked Questions
What is the difference between Replacement Cost and Actual Cash Value (ACV)?
What is an endorsement?
How do I get the most inexpensive homeowners policy?
- Bundle your auto & home policies = larger savings
- Higher deductible = lower premium
Why do I have a deductible?
What if my dog is on the "no-dog" list?
How does payment work for insurance if my loan is in escrow?
Do I need an umbrella?
Should I have a flood policy if I'm not in a flood zone?
Should I keep an inventory of my personal belongings?
First Time Home Buyer Insurance Service Area
Make sure you have the right amount and combination of coverage
Home Insurance Policy Definitions
Loss of Use
27 Garden Street
Danvers, MA 01923
Monday: 9am – 4:30pm
Tuesday: 9am – 4:30pm
Wednesday: 9am – 4:30pm
Thursday: 9am – 4:30pm
Friday: 9am – 4:30pm
Sat – Sun: Closed