Buying a new home is an exciting and stressful situation. There are many different tasks to complete before you get the keys to your new home. Many first-time buyers are unaware of everything they need to take care of before they start house hunting. One of these important tasks that needs to be taken care of after you find your dream home and your offer is accepted is finding homeowners insurance. Shopping for insurance can be overwhelming, with the amount of companies to choose from and comparing rates, it may feel like too much at times. However, we have some tips that will help you get through the process without any headaches!
Research Before You Buy
It’s important to do research on the property so you have a full understanding of what could affect your insurance premium. Some things to look into for your new home includes distance to the closest fire station, crime rate for the area, how many entrances/exits are in your neighborhood, and so on.
Along with gathering information on your new home, you’ll also want to do research on different insurance companies. You never want to settle on the first homeowners insurance quote you receive. Each insurance company will provide you with a different rate, as well as different options for coverage. Compare rates with other companies, and be sure to check out their reviews to see what other homeowners have to say about them!
Replacement Cost vs. Market Value
Once you receive some quotes, you may notice it is based off a replacement cost. A replacement cost is based off how much it would cost to replace your home. In other words, how much would it cost to rebuild your home with similar materials?
There are some policies that are based off market value. This means they will only cover what the current cash value of your home is based off the market. Be sure to pay attention to whether they are quoting you for replacement cost or market value, and decide which works best for you!
Consider Bundling Home & Auto Insurance
Many insurance companies will offer a discount if you decide to have both your home and auto insurance through them. When you speak with an agent, ask if they offer any discounts for bundling home and auto insurance. Some companies may offer up to a 25% discount!
Speaking of discounts, there are some other ways to save money on homeowners insurance. If you have a security system in your home, fire alarm, smoke detectors, smart home upgrades, etc. all of these can add up to pretty big savings on your premium. Always ask what discounts they offer, and be sure you know everything about your new home so you can maximize your savings!
Understand What Is and Isn’t Covered
Some buyers may assume that all insurance companies provide the same amount of coverage. However, you will quickly discover that some companies don’t offer coverage for certain things, such as floods, earthquakes, sinkholes, and so on. If you’re in an area that’s prone to any of these major events, you’ll want to make sure that’s covered.
On the other side, if you notice there’s coverage included for things you don’t believe would be an issue for your home, let the agent know! For example, if you live in an area that rarely experiences earthquakes, you may not be interested in paying more for that coverage.
Know Your Deductible
A homeowners insurance deductible is what you would pay out of pocket before your insurance will kick in and cover the rest. For example, if your deductible is $10,000, that is what you’d have to pay out of pocket before your insurance company will cover the rest. This is why it’s important to pay attention to the quotes you receive. Sometimes with lower premiums come higher deductibles.
Something else to keep in mind is that for policies that cover things like hurricanes, there is a separate deductible for those types of covered losses. For instance, your policy deductible could be $1500, but your hurricane deductible could be a percentage, like 5% (which is 5% of the home’s insured value). So if your home is insured for $300,000 and you have damage due to a hurricane, if your hurricane deductible is 5% then you’re responsible for the first $15,000 in repairs before your insurance company covers anything.
Higher deductibles mean lower premiums, but it also means you’re left holding a large bill if you experience a covered loss and need to file a claim, since you’ll have to pay your deductible first before the insurance company pays out. So you’ll want to find the right balance, and make sure you’ll have enough money saved to cover the deductible in case you experience a covered loss.
Ideally, while shopping for insurance, you’ll want to start as early as you can. Be sure to shop around and compare rates. Find what works best for your home and your wallet, and ask questions if anything is confusing.
The home buying process is overwhelming, but by following these simple tips, you may find the process a little easier!