The excitement of a first home also leads to a lot of worries for novice homeowners. Homeowners’ insurance is one of the biggest concerns because it is what protects the entire investment. A better understanding of what the policy covers, and how to keep it affordable can protect the homeowner now, and if they ever need to make a claim.
Protect What Matters
Homeowners’ insurance enables homeowners to replace belongings if theft or a disaster occurs and to rebuild the structure if some type of serious event takes place. The policy also protects people with coverage for medical and other expenses if someone is injured in the home during a disaster, or as the victim of an accident on the property.
Have it Ready
An insurance policy should start on the first day of home ownership. Most mortgage lenders require their clients to have the policy binders with them at the closing. The insurance becomes a part of the escrow account, so the monthly mortgage payment includes the cost of the insurance policy. The lender pays the company the premiums directly for the client.
Choose the Insurer
The homeowner has the right to select the insurance company they prefer. Mortgage companies typically only choose a company if the borrower neglects to select one on their own. The only concern for the lender is that the policy adequately covers the value of the loan, so they have protection if the home becomes a total loss during a disaster.
Decide on Amount
Homeowners and mortgage lenders have different concerns about the value of the policy. A homeowner needs to make certain their policy adequately covers the cost of the replacement of the home and the contents. Many insurers mistakenly believe their insured amount needs to match the appraised value of the property.
Appraised value and the cost to rebuild are often vastly different amounts. The appraisal covers the value of the home and land. Rebuilding only affects the structure itself. Insurance for a small home on a valuable piece of land could mean homeowners have too much insurance if they cover the home based on the appraisal.
Most insurance companies offer an amount for belongings based on the average cost to replace the furnishings and other items owned by typical families. Extra coverage if for people with exceptionally valuable possessions. Valuable artwork, an expensive piece of jewelry, or a vintage wine collection may mean adding an endorsement to the policy.
Cover Other Risks
Basic homeowners’ insurance policies do not always cover all the risks the home could experience. Homes in certain areas may need separate insurance for floods, wind damage, or even sinkholes. The risk of a sinkhole exists in more states than buyers may realize. Florida, Alabama, and Tennessee are just some examples of where homeowners may need the coverage.
All buyers need to consider what these added policies and their basic coverage will cost them as they decide what they can afford for a home. The lender may not allow them to forgo the coverage. The insurer the mortgage companies choose often have higher rates than what buyers would select on their own.
Look for Savings
A good credit score can help to lower the cost of insurance. A higher deductible also causes premium prices to drop. Savings are also often possible by adding inexpensive safety features like deadbolts and smoke detectors. Security cameras and sprinkler systems qualify many homeowners for a discount.
Avoid Potential Problems
Some things also raise the cost of a policy. Trampolines, swimming pools, and certain dog breeds often cost homeowners more on their insurance. Too many high-risk factors can even cause insurance companies to deny people coverage. The factors could even be something buyers cannot directly control, like neighborhood crime rates or the age of the home.
Insurance is not the only concern a new homeowner will have, but it is one of the few purchases that deliver peace of mind. At Metropolitan Insurance Service Consultants, we will happily help you to design an affordable policy with the right amount of coverage. Contact us today to begin.