Jeff’s Carlsbad Blog for First Time Home Buyers

What You Should Know About Homeowner’s Insurance

Posted in Due Diligence,Insurance by Jeff Dowler on May 4, 2009
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If you are buying a new home, you will be required by the lender to have homeowner’s insurance, the purpose of which, in part, is to protect the lender’s collateral. No insurance, no closing.

If the home is a condo, then there should be a master insurance plan for the complex and that may be all you need, but check with your lender – you pay for your portion of this insurance in your monthly HOA fees. It is still prudent to also have a homeowner’s policy to cover the cost of your appliances, the walls, flooring and all your personal stuff.

If you are buying a single “family” home, then you will need to:

  1. Make sure the home is insurable during the contingency period as stipulated in your contract [this may vary in states outside CA] by checking with a insurance company (perhaps one you already use), and
  2. Obtain a 1-year paid in advance insurance policy with a binder (the receipt) to provide proof of coverage at the time of closing.

You should also know that some insurance companies perform on-site inspections of the home before they will set up a policy (AAA for one) and more and more are doing so because of problems with under-insurance, existing damage (e.g., REOs and short sales), potential liability issues (pools, spas, tennis courts), and to make sure the cost of replacement is accurate (if there are lots of upgrades but these are not part of the policy, your replacement cost will be less…a big problem).


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