One of the other fun activities you do once you are in contract is shop for home insurance. There is a deadline set in your contract called Property Insurance Objection Deadline. Basically it means: if you go past this date you cannot break contract because you don’t like your insurance.
Because I am a grown up now, I called several companies to get a quote. Even on Friday before Memorial Day, I could recognize the excitement in their voice that only another sales person can understand (I used to sell websites.)
“Like a good neighbor, I’m here to scare you half to death.”
They asked me a bunch of questions about my house. I had my MLS listing sheet and my home inspection report in front of me, so I was able to answer all the questions. This is the kind of stuff they asked:
- Address
- Year Built
- Construction: Brick? Vinyl Siding?
- Roofing Material
- Square Footage
- Decks and porches?
- Garage?
- Windows? Bay Windows? Sky lights?
- Purchase price
- Any renovations or updates?
Just like any other insurance, they are trying to determine the overall “health” of the house. If your house is extra healthy (has a new roof, for example), you get discounts. When you buy a home in Colorado, a new roof is valuable because of things like heavy snow and hail storms. They also need to determine, as they put it “how much it costs to rebuild.” Of course, this is not something I want to think about (what do you mean if it burns to the ground? Noooooooo!!!), but when you talk about insurance, you have to think about worst case scenarios. As you would imagine, the more expensive your house is, the more it’s going to cost to insure it, in case it does burn to the ground.
More jargon- escrow and closing costs.
I also now understand how the insurance payments work. Basically, you pay your lender, and your lender pays your insurance company. You pay to insure your home for the year, up front. You pay this to your lender. This is one of your closing costs. Then, your lender will start collecting the money for next year’s insurance a little bit every month. This is escrow. At the end of the year, the lender will pay the insurance company from your escrow account.
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