Buying a home can be so overwhelming that it’s easy for first-time buyers, especially, to give minimal thought to the homeowners insurance process. Yet, if something happens to your home, homeowners insurance can make or break you. Before you just sign on the dotted line, here are 7 tips to guide you:
Know the Exact Value of Your Home and How Much Home Insurance You Need…
One of the most important things to understand from the very beginning is how much insurance you’ll need. First you’ll need to know the actual value of your home. If your home is damaged or destroyed, you’re going to need to know what it will cost to replace the entire structure… or that portion of the structure which is damaged.
A home builder or assessment company should be able to give you the truest value.
This is not a time to guess. Establishing your home’s value is not a do-it-yourself project. Nor is it a good idea to allow your insurance agent to be the one to solely establish that value. Again, this is your biggest asset and you’ll want to be sure you’ve got the fairest value.
Along with size, construction type, and overall condition of the house, location plays a big role in the cost of insurance and types of policies available. But unlike home buyers, insurance companies aren’t checking out school districts, awesome nearby restaurants, or your commute time.
But others factors do come into play. Homes located near highly rated, permanently staffed fire departments (and even fire hydrants), for example, may cost less to insure, says Loretta Worters, vice president of communications for the Insurance Information Institute.
And of course, proximity to the coastline is also weighed heavily. You’re likely going to pay a pretty penny for that idyllic spot near the coast.
“Because of the increased risk of catastrophic weather events resulting in claims, it will generally cost more to insure,” Worters says.
On top of a higher policy cost, coastal home insurance policies could include a separate hurricane or windstorm deductible based on the fees to rebuild a home.
Make sure you’re getting adequate coverage. The most important part of homeowners insurance is the level of coverage. Avoid paying for more than you need.
Here are the most common levels of coverage:
HO-2 – Broad policy that protects against 16 perils that are named in the policy.
HO-3 – Broader policy that protects against all perils except those specifically excluded by the policy.
HO-5 – Premium policy that typically protects newer, well-maintained homes; it covers against all perils except those specifically excluded by the policy.
HO-6 – Insurance for co-ops/condominiums, which includes personal property coverage, liability coverage and coverage of improvements to the owner’s unit. Insurance for the actual structure usually comes through the association.
HO-7 – Similar to an HO-3 policy, but for mobile homes.
HO-8 – Policy specifically for older homes, with similar coverage to an HO-2 policy. However, it only covers actual cash value.
Damage from flooding isn’t covered by typical home insurance policies. Any home located in an area prone to flooding requires separate flood insurance to cover these kinds of claims. (Flood insurance is available from the federal government’s National Flood Insurance Program as well as a handful of specialty insurers.)
Don’t live in a flood zone? Don’t assume you’re off the hook. Flood insurance may be a smart option for any homeowner, regardless of zoning—and if you’re not in a high-risk zone, you can probably snag some lower premiums.
“Ninety percent of all natural disasters in the U.S. involve flooding,” Worters says. “However, 25% to 30% of all paid losses for flooding are in areas not officially designated as special flood hazard zones.”
Know and Utilize All of the Things That Can Actually Save You Money on Your Premium…
While there are tons of risk factors that can drive up the cost of your home insurance premium, there are also many factors that can save you money on your policy, too. It’s important to know this so that you get all the discounts available to you.
For instance some things that might earn you a discount include:
• A home burglary alarm system
• Dead bolt locks
• Fire alarms and sprinklers
• Updated heating systems
• Updated wiring and electrical system for the home
• A home near a fire hydrant or fire department
• A home located near a police department
• Well-structured and maintained stairs, sidewalks, driveways, and entrances (less chance of injury),
Basically… anything you can think of that might make your home safer, and less likely to catch fire or injure a guest or passerby can give you a discount on your premium. Furthermore, having good credit can save you money as well.
Chris Budz is Lemont IL’s most experienced real estate agent. Whether you’re buying or selling your home, call Chris Budz, the smart choice for all of your Lemont IL real estate agent needs.