When you buy a home in the Bay Area, CA, you’ll need to purchase home insurance to cover it against loss. At Wai Cheng Insurance Inc. we understand that if you have never purchased a home before, you might not know that you’ll need to obtain your insurance policy before you close on your home.
When to purchase home insurance
That might sound strange, but you must purchase home insurance before you own the home. Most mortgage lenders require proof of purchase of home insurance at the closing. The term closing refers to a meeting at which you sign all of the paperwork and finalize the home’s purchase. Your bank or credit union requires certain paperwork at this meeting to show that you’re ready to take possession of the home.
A home insurance policy that meets the requirements of the mortgage lender tops the list of needs. Home insurance provides the bank with assurance that if something happens to the home to reduce its value, such as a fire or tornado causing damage, the bank won’t lose its investment. That’s called risk reduction.
When a lender provides you with a mortgage to purchase a home, until you pay the mortgage, the bank actually owns the home. Each payment you make on the mortgage earns you equity in the home. Once your equity equals 100 percent, you own the home.
When you buy a home policy to close on a home, the policy uses an insurance binder, a temporary agreement between the insurance company, in this case, Wai Cheng Insurance Inc., and you. The policy becomes permanent when you close on the Bay Area, CA house.
