During the mortgage underwriting process, it’s wise to begin researching Homeowner’s Insurance early on. Your home is likely your most significant purchase, so you want to make sure it is properly protected. We suggest obtaining quotes from multiple companies and starting with the one that insures your car; often they will offer a discount for having both policies with them.
Homeowners insurance is not a luxury, it’s a necessity. Most mortgage companies will not finance or make a loan for the purchase of residential real estate without proof that the property has this type of coverage. Renters may also be required to maintain renter’s insurance by their landlords. No matter if it is required or not, having this kind of protection is smart and beneficial. Homeowners insurance policies typically cover damage to both interior and exterior parts of the home, loss or theft of possessions, and personal liability for harm to others. There are three levels of coverage available: actual cash value, replacement cost and extended replacement cost/value. Insurers assess the risk that you’ll file a claim based on past claim history associated with the home, neighborhood, and condition of the property – which largely determines policy rates.
When shopping for a homeowner’s insurance policy, it is recommended to get quotes from at least five companies. Current customers may also be able to receive better deals from their current insurer.
A standard homeowner’s insurance policy typically covers damage to the interior and exterior of the house that was caused by fire, hurricanes, lightning, vandalism or other disasters. Floods, earthquakes and poor home maintenance are generally not covered but can be included with riders. Freestanding structures such as garages and sheds may also require separate coverage guidelines as with the main house. Clothing, furniture, appliances and most other contents of your home are usually covered if they’re destroyed in an insured disaster; you can even get off-premises coverage so you can make a claim for lost items no matter where they were lost. However there may be limits on how much your insurer will reimburse you for any losses incurred.
Renter’s insurance can provide coverage for up to 50-70% of the total value of your belongings, so if your house is insured for $200,000 then you could have coverage for up to about $140,000 worth of possessions. If you own high-value items such as fine art or jewelry, a rider or separate policy may be necessary to ensure they are covered. Personal liability coverage is also included in many policies and will protect you from lawsuits should someone sustain an injury due to something that happened on or off your property. Unfortunately, off-premises liability may not be included with renter’s insurance.
When it comes to home insurance, having at least $300,000 worth of coverage is recommended by experts. To ensure extra protection, you may consider investing a few hundred dollars more in an umbrella policy for up to an additional million dollars or more. In the event that you are forced out of your home for a time and must rent a hotel or house while it is being repaired or rebuilt, having additional living expenses coverage can help reimburse you for any incidental costs incurred during this period. However, there are strict daily and total limits on this type of insurance so be aware before making any large expenditures. As far as what kind of homeowners coverage is right for you, it really depends on the amount of protection desired and the corresponding premiums associated with each type of policy.
Homeowner’s insurance policies come in a variety of levels, designated HO-1 through HO-8. Actual cash value coverage covers the cost of the house and possessions minus depreciation. Replacement cost policies cover the actual cash value without this deduction, while guaranteed or extended replacement cost/value offers the most comprehensive protection, paying for whatever it costs to repair or rebuild your home – even if it exceeds your policy limit. In some cases, an insurer may offer extended replacement with an additional 20-25% coverage over and above the limit purchased.
Homeowners insurance can provide a cushion in the event of increased replacement costs, but it’s important to make sure you’re covered for more than your home is worth. Adam Johnson, a home insurance product manager for policy comparison site QuoteWizard.com, says that often shoppers make the mistake of insuring their house just enough to cover the mortgage. However, due to market fluctuations it’s always advisable to get additional coverage. Natural disasters and acts of war are typically excluded from homeowner’s insurance policies, so if you live in an area prone to floods or hurricanes you’ll want extra riders or an extra policy for flood and earthquake insurance. Rates are determined by variables like geographic location and building materials used (purchased or built). Additionally, there are optional add-ons such as sewer and drain backup coverage and identity recovery coverage which can also be purchased for additional protection.
When it comes to home insurance, HUB International’s Insurance Advisor, Trish Bank, explains that insurers use past claims as a key factor in determining the risk of insuring a property. Not only will claims made by the homeowner be taken into consideration, but claims related to the property and even the homeowner’s credit rating can play a role in how much you pay for your policy. Frequent and severe claims can cause your premiums to be bumped up into a higher pricing tier while too many recent claims may mean you’re not eligible for home insurance at all. Other factors such as neighborhood crime rate and building material availability will also affect rates. Finally, coverage options such as deductibles or added riders like those for art and jewelry also come into play when deciding what you’ll pay annually for your policy.
Home insurance rates can vary greatly depending on a variety of factors. Insurers often consider the type of building construction, roof type, home age, heating system (if an oil tank is on premise or underground), proximity to the coast, presence of a swimming pool and trampoline, security systems and more. Additionally, if a home is not well-maintained it could reduce an insurer’s interest in providing coverage due to the increased odds that they would have to pay out for damage. Even having certain breeds of dog in the home can raise your rates as some pets can cause a great deal of damage.It may not be wise to skimp on insurance, but there are ways to reduce your premiums. Here are some tips for cost-cutting on your coverage:
1. Shop around for the best rates and compare different policies.
2. Increase your deductible, as this will usually lower your premium payments.
3. Ask about discounts such as a multi-policy discount if you bundle other types of insurance with the same provider or a loyalty discount if you’ve been with the same company for several years.
4. Consider dropping optional coverage such as collision or comprehensive coverage on older vehicles that don’t have much value anymore and may not be worth repairing in an accident anyway.
5. Pay annually instead of monthly, since insurers usually charge extra fees when bills are paid in installments over time rather than one lump sum payment up front each year.
Contact us for our favorite home insurance providers.