If you are in the process of purchasing your first home in New Jersey, it is important to educate yourself on homeowners insurance before you are about to close escrow. While you have found the perfect home and a lender to provide you with the capital to purchase the home, you have yet to bind homeowner insurance New Jersey. By comparing coverage options and educating yourself on what exactly New Jersey homeowners’ insurance covers, you will be able to find an affordable policy that provides you with peace of mind and comprehensive coverage. Because purchasing a home is perhaps the largest investment you will make in your lifetime, you must take proactive steps to ensure the investment is protected against common perils.
Mortgage lenders will require borrowers to bind fire insurance at the least. While most lenders only require traditional homeowners insurance, some will also require borrowers to bind flood insurance if they are found to be in a flood zone. It is important to research what type of insurance policies you are required to carry before your close of escrow approaches.
Dwelling coverage is the only coverage within your homeowner insurance New Jersey policy that will concern the lender. You will need to inquire what dwelling limits the lender requires you to carry. While you are allowed to carry higher than the required limits, lenders will not approve coverage that is lower than what the lender requests. Dwelling limits on your home insurance policy are designed to pay to rebuild or repair your property in the event of a covered loss. Covered losses include fire, theft vandalism, smoke damage, windstorm damage, and hailstorms.
Borrowers should consult a local contractor to determine an adequate amount of coverage based on the square footage and quality of the property. The dwelling coverage does not include the value of the land because the land cannot be destroyed, therefore your insurance coverage will not technically match your loan amount. In some circumstances, home insurance companies will offer extended replacement cost coverage that will provide additional amount coverage to factor in inflation of costs of services and building materials. Consult your lender to determine whether or not you are required to choose an insurance provider who includes extended replacement cost within the contract.
Buying a home can be a stressful situation if you do not walk into the process prepared. Dot all of your Is and cross all of your Ts so that your loan closing can be as seamless as possible. By receiving quotes from multiple insurance companies and receiving insurance advice from licensed agents in New Jersey, you can obtain the knowledge you need to build a comprehensive policy that covers your home and satisfies your lender.
