When you finance a home in the state of New Jersey, your lender will require that you maintain continuous homeowners insurance to satisfy the requirements of the loan. Before the lender will approve the close of escrow and hand over the keys you will need to provide proof of acceptable home insurance NJ. Inadequate home insurance has been the cause of escrow delays for years. If you want to prevent having to reschedule your move because you did not invest in the right type of insurance, know what lenders require. Below are the most important factors to consider when purchasing home insurance before closing.
Dwelling Coverage- Coverage A
Dwelling coverage is commonly referred to as Coverage A on a homeowners insurance policy. This coverage will pay to repair or rebuild your home if it is damaged by a covered peril. When a lender is willing to lend you hundreds of thousands of dollars to buy a home, they want proof that the asset they are financing is adequately insured. You are not required to insure your home for the amount you are financing. This is primarily because the purchase price of the home includes the value of the land.
You can calculate the estimated cost to rebuild your home on your own or hire a professional. When you are calculating the cost to rebuild your home, be sure to consider the size of the property and the quality of construction. Some contractors will tell you how much they charge per square foot to build a home from the ground up. Once you calculate an estimated cost to rebuild your property, contact your lender to make sure the limit is adequate. The lender may request that you increase the limit to satisfy their lending requirements. You can make adjustments to your home insurance NJ quotes as long as it is before the effective date of the policy.
Loss Payee Clause
After you choose an adequate dwelling limit you will need to review the policy to make sure the loss payee clause is listed on your home insurance policy. A loss payee clause lists your lender as an additional insured on the policy. This means that the lender is listed as a payee in the event the home is damaged or deemed a total loss. The loss payee clause must read exactly how it appears on your escrow closing documents. Even one simple typo could result in a delay of a few hours or a few days.
Some mortgage lenders deal directly with stable home insurance NJ companies. If you have not started obtaining quotes for insurance request a quote from the company your lender recommends and make the process much easier. Compare quotes for insurance in advance and enjoy your new home immediately after escrow closing.
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