A standard homeowner’s insurance policy generally protects against: • Fire and lightning • Damage from hail and windstorms • Theft and vandalism • Smoke damage • Falling objects, like tree branches • Damage from the weight of ice, snow, or sleet • Frozen plumbing, heating, AC, or other household systems • Vehicles (and even aircraft) — not the vehicle itself, which is the object of auto insurance, but damage from vehicles — e.g., in the event a car runs into your home. • Riots or civil commotions • Explosions Homeowner’s insurance policies also generally include coverage for liability, personal belongings, other structures on your property like carports and fences, and additional living expenses if your home becomes temporarily unlivable. There are advantages of paying homeowner’s insurance up front at closing, rather than escrowing the cost within your monthly mortgage. Paying your homeowner’s insurance premium all at once and before closing allows you to exclude that premium from your closing costs, which generally include lender and other fees for which you’re responsible in addition to your down payment. Closing costs are generally paid in one lumpsum. You may also choose to set up an escrow account, depending on your mortgage agreement, to avoid paying large sums all at once for homeownership costs. Essentially, an escrow is a savings account designed to help you pay your mortgage, property taxes, and even homeowner’s insurance in smaller, periodic installments. Your lender usually deals with payments from your escrow, which means less stressful financial management for you.
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