Homeowners insurance is one of those costs that is not really understood by most home buyers. A lender might go over the general concept and include an estimate of what homeowner’s insurance might be, but that’s about it until the home buyer actually shops for home insurance a week or so before closing. The cost to insure a home can be much higher than what the lender estimates, and that can change a home buyer’s monthly budget dramatically. I must also say before I go any further, the following blog is not intended to be construed insurance advice. It is only meant to be a topic home buyers should investigate early.
How Much is Homeowners Insurance in Austin?
Like car insurance, home insurance premiums vary with the type of coverage you select. I’ve seen premiums as low as $400/year and some as high as $4,000 per year. Your insurance agent should be able to give you a better estimate if you tell them the type of house you’re looking for (price, age, etc).
A Lender Will Require You to Pay a Full Year of the Policy at Closing
If you are getting a loan to purchase this property, your lender will require you to pay one year’s premium at closing. If you are paying your property taxes and insurance monthly to an impound account, your lender will also start collecting for next year’s policy with your first payment. This way, the money will be there when they have to pay the homeowner’s insurance premium a year from now. In the first year of homeownership, you’ll be paying for two year’s of homeowner’s insurance.
Consider Home Insurance a Closing Cost and a Monthly Cost
When you are considering homeowners insurance, count it as a monthly cost and a closing cost. Take this premium into account when you consider your monthly budget for your home. A lender will require you to have homeowner’s insurance for the life of the loan, so it is definitely not an optional cost. Make sure you’ve budgeted enough to cover the insurance premium both at closing and monthly.
How Do I Find Out How Much Homeowners Insurance Will Be?
Contact your insurance agent early in the process. You won’t be applying for homeowner’s insurance until you find a house and are under contract, but they will be able to give you a ballpark based on the type of home you’re considering. This way, you’ll know you are budgeting appropriately and will be comfortable with your total monthly housing payment.
Is Homeowners Insurance Easy to Obtain?
Currently, it isn’t difficult to get homeowner’s insurance, but that hasn’t always been the case. We’ve had several insurance crises over the past few decades that have made it more difficult for home buyers to acquire insurance for the new home. Recently, I had a client whose insurance company canceled their policy a few days before closing after doing a visual inspection of the property. These buyers were left scrambling to find another carrier at the last minute. Avoid this stress and check your coverage before you close to ensure you will be covered.
Pro Tip: Speak to Your Insurance Agent Before You Find a House
Reach out to your insurance agent before you find a house, so you can get an idea how much homeowner’s insurance will be. This way, you won’t be surprised with the cost a week before closing and you’ll be comfortable with your monthly budget.
Bonus Pro Tip: Get a Few Insurance Quotes
Insurance premiums vary from carrier to carrier and depend on the coverage you select. Work with a great insurance broker, who has access to multiple insurance carriers, and who can help you understand what type of coverage you will need. When comparing quotes, make sure you are comparing similar coverage. Some carriers will offer a lower cost insurance policy, but it will not cover the same items as a higher cost policy.
Need a Recommendation for an Insurance Broker?
Send us an email at info@11OaksRealty.com and we’ll send you some names of insurance agents who have done a great job for our clients in the past.
Considering Buying a Home in Austin?
We’ll help you uncover the costs of home buying before you sign on the dotted line, so you’ll be comfortable with your monthly housing cost. Then, we’ll help you find the right house and investigate it thoroughly so you know what you’re buying. Our team has a combined 55+ years of experience representing home buyers and will show you how to make the process fun and worry free. Check out our Austin Home Buyers page for more info about our unique Home Buyer Representation Program. Then, fill out our Buyer Survey, call us at (512) 827-8323 or email us at info@11OaksRealty.com to schedule a no obligation consultation.