As a first time home buyer, there is a steep learning curve of new components to consider including finding a trusted realtor, mortgage pre-approval, and connecting with a real estate lawyer. One of the most important new fields you will have to navigate is homeowners’ insurance. Home insurance protects your investment in the face of the unexpected such as a flood. Here is an outline of what you need to know about insurance and how it works as you embark on purchasing your home.
Start Early
As a rule, mortgage companies want proof of insurance before you close on your new home, so you don’t want to wait on this. 4-6 weeks before closing, you can start getting quotes and determining which company will work best for you. Starting early also gives you the advantage of being able to complete more comprehensive comparisons between companies to make sure you get the best product for the best price. Compare at least 3 insurers and check reviews and ratings to see which companies have a good reputation with their clients. Giving more time to the insurance companies to underwrite your home means you get more appropriate coverage too.
What Coverage is Provided?
While homeowners’ insurance is enormously customizable, there are some standard pieces included. Damage to the inside or outside of the house by fire and vandalism is covered. Floods or other extreme weather phenomena may need extra coverage to be purchased. If you are forced out of your home for repairs, some of the rent and incidentals may be covered. The contents of your home are included in the coverage if destroyed by the event. However, if you own high-priced items such as art, instruments, or jewellery you want to make sure they are included in the policy, which you may have to pay a bit extra for.
Liability coverage protects you from lawsuits filed by other people. This can include injuries that happen on your property, injuries caused by your pets, and sometimes can even cover you when you are off property. This should be clarified in your policy, so you know what is included.
How your Rate is Determined
The amount you pay for your home’s insurance coverage is based on several factors. The first factor is the number of claims that have been made on a home. If claims have previously been made on your new home, it may drive your rate up considerably. If more than one claim has been made, especially for something like flooding, it can have a severe impact on your rate.
Other factors like the neighbourhood, the construction materials used in your home, the crime rate of your place will all play a reason. Increasing your coverage options to include higher ticket contents or outbuildings, or a pool into your policy will also affect your rate.
How to Save
While it isn’t a good idea to skimp on your coverage, there are ways to save money. First, make sure your home is in great condition when being assessed. Research shows that adjusters are more likely to pay a claim on a well-maintained home. If your home is in disrepair, the claim is likely to be adjusted to show a lesser value. Families who are mortgage-free often see a drop in their premiums because it is assumed you will take better care of a property if you own it.
Get a security system. You can ask before you commit, but most insurance companies offer significant discounts for having a monitored security system. Many homeowners find that the savings are greater than the cost, which means you essentially get the system paid for with the discounts. Ensure that smoke and CO alarms are fully updated. Things like weatherproofing, sprinkler systems, and deadbolts may even decrease your monthly bills.
Assess the amount of your deductible. The higher the deductible, the lower your premiums. HOWEVER, this comes with a warning that having a high deductible means you will likely end up paying for things like broken windows, or mid-sized claims yourself if they arise. These can cost hundreds of dollars and may not be economical in the long run.
Bundle for discounts. Many insurance companies give discounts for having bundled services. This means that if you have your vehicles or other property insured, you may get discounts on every service (just like your standard phone or cable packages!). Ask your company what discounts they offer and get quotes to see which company is offering the best deals!
All insurance is not created equal. The cheapest option is likely to offer the least coverage and that’s not always best. You need to comparison shop to be positive you have selected the right company. Once you’ve made your choice, you can reassess but remember that many companies also offer loyalty discounts for staying with them.
If you are purchasing home insurance for the first time, reach out to your existing insurance company for quotes and if you have no idea where to start, your realtor can help you find the information you need to give for quotes such as the building materials and age of renovations to the home. At the Blackwell Group, we would love to help and can refer you to a great network of trusted references for your home buyer’s insurance. Reach out today!
