If you’re looking to buy a loft, penthouse, or condo in downtown San Diego, it will likely be the largest purchase you will make in your lifetime. Because of this, you should make sure you’re properly protecting such a significant investment. Your lender may also require additional protection. Insurance will factor into your monthly costs, but it’s important to understand some of the things you may or may not specifically need to cover.
1. Do You Need Private Mortgage Insurance?
Private mortgage insurance (PMI), which is unrelated to your homeowners insurance, protects lenders from default and foreclosure. If you are not able to make at least a 20 percent down payment when buying a home, your lender will require PMI. The good news is you don’t have to pay for PMI for the duration of your loan. If your loan balance has reached 78 percent of your home’s original value, if your equity has reached 20 percent of the purchase price or appraised value, or if you’ve reached the midpoint of the amortization period (e.g. the 15th year in a 30-year loan), you should talk to your lender about having the PMI terminated.
2. Does Your Policy Cover Replacement Cost or Actual Value?
It’s important to understand this distinction in case of significant loss or damage to your home. Replacement cost refers to the amount it would cost to replace destroyed, stolen, or damaged items with the exact same item or a similar item if it is no longer available. Actual value only covers your home and possessions for the value at the time the loss or damage occurred, which is often less than original market value.
3. Is Flood or Earthquake Insurance Necessary?
Standard homeowners insurance policies do not typically cover loss and damage resulting from natural disasters such as floods and earthquakes. Though additional insurance for this can be purchased, you should take some factors into consideration before making the decision. For instance, do you live in a high-risk area and feel you do not have sufficient resources to repair and rebuild should one of these disasters result in damage to your home? If so, it might be a good idea to purchase one of these additional policies.
4. Will Increasing Home Security Affect Your Premium?
Adding an alarm system, smoke alarms, or security cameras to your property isn’t just good for providing peace of mind. Taking these measures can also result in a cheaper home insurance premium. Just make sure to contact your insurance provider to inform them of any security upgrades you are planning for your home because some security measures may not affect your premium.
5. When Should You File a Claim?
Home insurance claims can sometimes result in a 15 to 20 percent increase in your premium, which means it’s a good idea to avoid making a claim unless it’s absolutely necessary. You’ll need to take deductibles into consideration, weighing out the amount of the deductible versus the cost of the damage. The last thing you want is to be spending more money as a result of too many claims, especially if it’s more affordable to make the repairs yourself.
These are just a few of the insurance costs to consider if home ownership is on the horizon. Check with both your lender and your insurance company to make sure you are getting the best rates and all of the coverage your home needs. If you’re looking for downtown San Diego real estate for sale, take a look at the listings on the 92101 Urban Living website or give us a call today at 619-649-0368. ')}