Hello Everyone
This Is Charles McShan with Century 21 Univeral and the question someone asked me the other day was.”Do I have to purchase homeowner’s insurance when I buy a home?”That is a good question. I will answer that question for the few who might be thinking along those lines. I say the few because the majority of homeowners know why they need homeowner’s insurance. All you have to do is look at the above photo. Yesterday that woman was enjoying the benefits of homeownership. Today like a snap of a finger everything has changed. Her home is gone, destroyed. What caused the destruction? Was it a hurricane, tornado, earthquake, wildfires, flooding, house fire, wind damage? We do not know but we can see that she is in a state of shock. Sad to say she is not the only one. Look at the news. Whole towns in California are being destroyed by wildfires daily. This scenario is ongoing. The weather is out of control not only in this country but worldwide.
Now I cannot speak for what goes on in other countries but after this woman gets over her shock I know what she is going to do. She will call her Insurance broker and the process to rebuild her home will start. Why? Because a future homeowner who wants to cover all their options will know that they cannot risk purchasing without homeowner’s insurance. Yes, it costs money but once that disaster hits your property and you do not have homeowner’s insurance you can be destroyed financially Look at what has happened throughout the world weather-wise in this past month of July 2021. If you are a gambling person do you want to play those odds? In this blog post, we will now talk about homeownership insurance and how it will benefit you in the long run.
Back in the day, you could purchase a used car and not have to buy auto insurance. Today, if you purchase a good used car, you will not be allowed to pull that car off the lot with auto insurance. Today more residential landlords are requiring their tenants to purchase rental insurance. Will it become mandatory one day? Who knows. A lot of renters are under the misconception that if their personal property is stolen or destroyed by fire or other elements the landlord’s insurance policy will reimburse them. Not true, many have learned the hard way. It is up to you to have renters insurance coverage. The landlord’s policy will not cover you for your personal losses. Typical renter’s insurance depending on where you live is under $40.00 or less a month. That will be less than a full tank of gasoline so it will be a wise investment for you and your family. Keep this point in mind.
Twenty years ago the average home had maybe only one desktop computer for the whole family. Today some homes have over 3 desktops computers along with laptops, tablets, gaming devices, 30-60 inch flat screens, surround sound music, and a variety of cell phones and musical instruments. If someone burglarizes your home or a weather-related disaster hits your home you need rental or homeowner’s insurance to replace those beloved and needed possessions. With this coronavirus making a second comeback, many of you are still working from home online and your kids just might have to resume school online again this fall. So in a modern-day home, you cannot afford not to have everything you value and need not covered by renter’s insurance, Remember it will cost less than a full tank of gasoline.
I always have to keep my renters in mind, they too need to have their rental units protected. So let’s now get back to the homeowner with the question of the day. Do I have to purchase homeowners insurance when I buy a home? Legally you can own a home without homeowners insurance and if you purchase your home free and clear with all cash no one can force you or say anything about it. But how many people today can actually pay cash. The majority cannot. If you purchase a home thru a loan of any kind the lender who supplied that loan has a financial interest in your home. They are in business for making money so they will require that your home be insured so they can get their investment back along with the profits they make in charging you interest. So let’s answer some questions some of you may have.
Article Guide
1: What is Homeowner’s Insurance?
As I said above insurance is a protection for something of value to you. You protect your car, so you too must protect your recently purchased home. The homeowner’s policy provides coverage for your home, your possessions inside and outside of your home. Just like an auto insurance policy will contain liability clauses your homeowner’s insurance will protect you and members of your family and strangers from damages and injuries. Depending on the policy you can cover for loss of use and other structural issues that could come up. You can also purchase riders that will protect you from natural disasters, earthquakes.
We must not forget about flooding. Within the last week of July 2021, The United States, Europe, and Asia experienced massive flooding. I do not know about those other countries but here in America, most people who have never experienced flooding before are shocked when it happens to them. They thought their regular insurance policy would cover it. They file a claim, their claim is denied because they did not purchase flood insurance. They learn the hard way they lost everything. On top of that, they still must pay their mortgage on a house that is destroyed. Do not let that happen to you.No one can force you to purchase those additional riders but you must do your due diligence about the weather issues in the place you which to live and plan accordingly This is for your protection!
2: I don’t need insurance. I will pay for any damages to my home out of my pocket!
Do you think so? For those penny pinchers out there trying to save a buck by not purchasing homeowner’s insurance consider this. The cost of repairing the damage can be expensive than having a homeowner’s policy. Damage from burglaries, vandalism windstorms hail storms, lightning strikes can cost thousands of dollars and those contractors knocking on your door are not interested in” I do not have the money. Cut me some slack”. Look at this picture.
This house and group of homes were either destroyed or severely damaged by a tornado recently. Could you pay out of your pocket 100% to repair this kind of damage? Also since you did not have insurance all of your valuable possessions inside your home were destroyed. Are your pockets that deep?
Going back to the example of an automobile if you have paid off the loan on your car and your car is several years old you might forsake full coverage and only have liability insurance. That is legal you have decided tt to protect the other person and repair the damage of your car yourself. In the case of your home, you are not given that option. Without liability coverage, any visitor or trespassers who injure themselves on your property will sue you for lost wages, hospital, and legal bills. You will be in debt for decades all while trying to save a few dollars. That will be a nightmare but guess what? You can wake up now. That will be one bad dream you will not have. For these above examples to happen you will have to
1:Beat the system in place.
2: You felled thru the cracks and were unnoticed. Both are highly unlikely why? Continue reading below knockin
3: What is the system in place?
That system is called checks and balances. That home you wish to purchase is own by a Financial Institution. They want you to buy it. This will be maybe the biggest investment of your life. The lender will require you to purchase homeowners insurance to protect their investment. When you get preapproved for a loan your lender will require you to go and bring back the lender’s proof of certain things one being proof of insurance. The insurance might cover the value of the home in the event of a complete loss. You can choose to add additional coverage as I wrote above to cover high risks thing as floods or you can choose not to pay for it. No one will force you to do so. The mortgage agreement itself will outline the required minimum insurance.
This system protects the investors while also protecting you the homeowner thru checks and balances. Let’s say you fail to pay your monthly premium. Your coverage lapses and your mortgage lender gets contacted. When you do not have insurance on your home the amount you owe is now due. You violate your contract. Two things now can happen
1:Depending on your policy you could now be in default and could face an immediate foreclosure.
2:Your mortgage lender could force a new insurance provider on you with higher premiums and something you once had covered is no longer covered. Yes, they can do this remember while you can tell everyone this is your home legally it still belongs to them until you pay the last installment and they give you the title. I place this in bold type so it will stand out. If you try to violate the system in place the system can and will turn around and bite you harder. Ouch! And for those who say I will get insurance after I close. Guess what? You will need to prove that you have paid the first full year of premiums on your homeowner’s insurance at the closing. Before that first year is over someone will be contacting you about your policy. Once again checks and balances
Summary!
Do I have to purchase Homeowners insurance when I purchase a home? Legally you do not but do not try to hire a lawyer to defend that point of view in a court of law. Your Real Estate attorney will inform you of the steps to homeownership. I wrote a blog post on that topic a while ago and if you wish to read it please click this link>>>https://www.charlesmcshan.com/steps-to-home-ownership-in-the-chicago-land-area-part-3-the-loan-appraisal-process/
Homeownership is a great accomplishment but it comes at a cost You can defer maintenance, you can delay paying certain bills you can rob Peter to pay Paul. But if you are not a 100% cash buyer home insurance will be in your mortgage agreement. Yes, it will cost you some money but this is the price you will pay to a homeowner. Your home is outside trying to protect you and your loved ones from the elements of life. Let’s look at what those elements have done to the USA in just 2 short months.
Just the other day a thunderstorm complete with high winds came thru Chicago at night damaging areas. Recently a tornado struck Naperville and other areas. The picture above highlights one area where the damage occurred. That one tornado stayed on the ground for over 2 miles. There were down trees power lines and plenty of destruction. Many people lost their homes. Luckily no one died on that day. It will take months for many of them to get their lives back in order, but mentally, some survivors may be scarred for life.
In the West, wildfires burn out of control, in Arizona as well as many parts of the South and Midwest there has been mass flooding. The month of August will continue to bring hurricanes and tropical storm season for the States boarding the Atlantic Ocean and the Gulf of Mexico. For all of you going thru these trials and tribulations, you have my thoughts and prayers. But after the disaster has passed you know they are only a phone call away. if you have homeowners insurance If you have let your policy lapse your troubles are just starting and there is no way to sugarcoat that.
To summarize it you wanted that home of your dream, You got it congratulations That home comes with price tags. One of the price tags is paying for homeowners insurance. Depending on where you live you might have no other choice but get additional coverage. If you do not get that coverage they will not insure you. Case in point homeowners living near the Fox and Desplaines rivers in the Chicago area These last 2 winters have been mild, but when snowfall was heavy, the snow melted it and traveled southward into the state of Illinois. This excessive water caused these 2 rivers to overflow their banks and flood out homes close to the river banks.
It happened before, it can happen again. There are many flood zone areas throughout the state of Illinois. Do not quote me but your regular homeowner’s policy will cover water damage coming up thru your sump pump, roofing, or other areas. When that water invades your property thru the front and back doors or your windows you need flood coverage. Check with your local city or county office or call your insurance agent. It is better to be safe than sorry. Here is a series of articles that go deep into that subject. Please click here>>>https://www.houselogic.com/spotlight/severe-weather-ahead-no-sweat-as-long-as-youre-prepared/
Conclusion!
Do I have to purchase homeowner’s insurance when I buy a home? If you have read this blog post you will conclude that you do have to buy homeowners insurance. The lender will demand it and you and your family will sleep better at night knowing that you have it. If you have any other questions I am here for you. Even though the coronavirus rages forward with its many variants life must go on. July is now over, the city, county, and State are completely open. In my area of West Ridge Chicago, the parks are full, the beaches are open, people are riding their bikes and fishing off the Rogers park pier located at the beach at Pratt ave. Chicago as well as the whole Chicagoland area is bustling with activity. Get out and enjoy this summer but be wise.
Mask restrictions are back, I am not going to get into the mask debate because I have been wearing mines all year and will continue into 2022. It is my call, not no one else’s. My Real Estate office is located at 7300 N. Western Ave. and we still require you to wear a facial covering. We will keep our office safe for any and everyone who chooses to enter. Low inventory of homes for sale on the market continues but the red hot seller’s market might be slowing down. Mortortiums regarding mortgages and evictions are coming to an end and who knows what that will bring shortly. If you stay in touch with me I will continue to provide you with the latest real-estate information affecting you and your lifestyle. This is Charles McShan with Century 21 Universal saying. until the next time. please continue to stay safe.
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