Insurance for Homeowners

For many homebuyers, insurance is a back burner item that has to be done before closing or just another cost that appears on the closing statement. But, that’s changing in a big way. Many areas with a history of high insurance claims such as Florida and Texas have experienced skyrocketing rates, more exclusions, and closer scrutiny of applicants. Some states are also revising their purchase offers to include a provision that makes the offer subject to the buyer being able to obtain homeowners insurance.
Actually, there are several different insurance policies that are part of every home sale, namely, homeowners, flood, private mortgage insurance, title insurance, homeowner warranties, and sometimes mortgage life insurance. These policies stay in the background, hardly noticed until a problem occurs; then they become very important.
Dale and Janelle found this out just one day after they closed on an updated bungalow they found in an upscale but older area. They had a professional inspection on the property, and the inspector didn’t find any problems.
During the move in, Janelle turned on the tub and another faucet to flush out the drains but got distracted for a few minutes and let the water run. Later, when she went downstairs, she found to her horror that there was a foot of water in the basement. Water had backed up through a floor drain in the laundry and flooded the finished basement. A plumber, in checking out the line to the street, found that tree roots had invaded the sewer pipe and created a partial obstruction. Normal flow of a toilet or faucet was not a problem, but the line couldn’t handle the larger volume from two faucets opened to full force.
The damage was considerable, with soaked sheetrock, carpets, and some furniture. Luckily, Dale and Janelle had a good homeowner’s policy (HO-3) that paid for the damage, less their $500 deductible. With so many unknowns that can carry a big price tag, homeowner’s insurance and some of the other insurance options become an investment, not an expense.
This chapter covers these different insurance programs that are important to homeowners, along with how to shop for the best deal.
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