Homeowner’s insurance is a mandatory part of the home-purchasing process.
It’s also one of the least considered.
Lenders require prospective borrowers to secure a home insurance policy to cover at least the value of their mortgage. Homeowner’s insurance isn’t included in the mortgage, which means buyers are on their own to get coverage.
But what usually happens is the lender points the borrower to a specific insurance company (typically because there’s a referral relationship in place). The vast majority of borrowers, bent on finishing the home-buying process, jump on that first contact in a rush to move forward.
And that’s not exactly a recipe for savings.
The reality is it’s important for borrowers to take a little time to comparatively shop and get insurance quotes from multiple sources. You can get a free insurance quote from a host of reputable websites and aggregators, including NetQuote and InsureMe.com.
Granted, it’s probably the last thing hurried borrowers want to do with a home purchase in sight. But parsing through multiple quotes and creating some competition can save homeowners more than $1,000 per year, depending on the policy.
In fact, one of our loan officers recently purchased a home. He solicited five quotes for homeowner’s insurance and found a range of $500 from the lowest to the highest, all for the same scope of coverage.
And it’s not just a money thing — getting multiple insurance quotes can also lead to better terms and coverage plans.
In the end, your lender’s suggested insurer might have the best deal. But you won’t know until you start asking around.
That extra $50 or $90 you could save every month in homeowner’s insurance costs could knock off a decent chunk of your mortgage through additional payments to the principal balance.