Homeowners Insurance Tips for New Home Buyers
Buying a home is a huge commitment, any way you slice it. It is imperative that you purchase home insurance to protect your investment and your financial wellbeing. If you are new to home ownership and homeowners insurance, take some time to review the following tips.
Know What Your Home Insurance Policy Covers
Homeowners insurance covers damage to your property and possessions in the event of certain storms, fire, theft or vandalism. It also provides liability coverage that protects you if someone gets hurt on your property and sues you. There are five basic coverage areas:
- Dwelling coverage: protection for damage to the house due to fire, hurricanes, lightning, vandalism or other causes of loss that the policy designates.
- Other structures coverage: protection for damage to detached structures like garages, storage sheds, fences, driveways, sidewalks, patios and so on.
- Personal property coverage: covers loss or damage to the contents of your home including furniture, clothing and most of the other belongings in your home, subject to certain limits.
- Loss of use coverage: provides for temporary living expenses if you cannot live in your home while it is being repaired or if you cannot enter it. You can be reimbursed for the costs of rent, hotel rooms, meals and more.
- Personal liability coverage: protection if you or a family member or a pet injures someone or damages someone else’s property at home and even away from home.
Know What Your Policy Doesn’t Cover
Certain causes of loss or damage are excluded from most standard homeowners policies. Examples include earthquakes, power failure, war, acts of terrorism, nuclear hazard, government action, faulty zoning, bad repair or workmanship, defective maintenance or flooding.
Regarding water damage, in general, water damage that is caused by water that comes “from above” (e.g., rainwater or a burst pipe) is usually covered. Water damage “from below” (e.g., sewer backup or flooding) isn’t. If you live in a flood-prone area—and perhaps even if you don’t—you need flood insurance. Flood insurance from the National Flood Insurance Program is available through your insurance agent.
Talk to an Experienced Insurance Agent
Your new home is your greatest asset. You need to speak with an experienced, knowledgeable insurance agent who can help you understand what type of coverage you need and find you the best quality policy to fit your needs and budget. Don’t make the mistake of buying a one-size-fits-all policy online, only to find you have gaps in coverage when it is too late.
Maximize Discounts and Take Precautions
Insurance companies base your premiums on the risks they assume that you face. You can take a variety of measures to help you reduce your premiums, from maximizing discounts that your carrier offers to adding certain safety and security features to your home.
Adding smoke detectors, dead bolts, security systems and other security measures will not only make your home safer, but it will also make you eligible for discounts on your home insurance premiums. In addition, you might be eligible for a wide variety of other discounts, from multi-policy discounts if you bundle several policies with one carrier, to automatic bill paying discounts and many more.
You will also need to take good care of your new home! Simple, routine maintenance is important to keep your home in good shape for the long haul, and it will go a long way if you ever have to file a home insurance claim. Insurance companies often won’t pay for a damage claim if the damage was caused by negligence on your part rather than some other type of covered event or peril.
Know the Difference Between Replacement Cost and Actual Cash Value
Your home insurance policy will calculate the value of your property based on its actual cash value or its replacement cost value.
- Actual cash value coverage pays to replace your home or possessions minus a deduction for depreciation, up to the policy limit. You will receive reimbursement based upon what your items are worth today, not what you paid for them.
- Replacement cost coverage will reimburse you for the actual cost of replacing your property with no deduction for depreciation, up to the specified policy limits. This type of policy allows you to rebuild your home, make repairs, or replace destroyed or damaged items using similar materials at today’s costs.
Take a Home Inventory
Your personal property coverage limit will be a percentage of your dwelling coverage amount. A great way to determine if this amount is appropriate is to prepare a home inventory. In addition, a home inventory can help you get a claim settled faster with less red tape.
Go from room to room and record all of your possessions. Take note of the price you paid for each item, the approximate date of purchase, and any model numbers or other pertinent information. Don’t forget to include your garage, the attic and even your vehicles.
After you prepare your inventory, secure it in a safe place. Remember to continuously update it as needed, especially if you make any major purchases.
Consider Special Coverage for Jewelry and Valuables
Basic homeowners policies limit coverage for certain types of high-value personal property such as jewelry, furs, stamps, coins, guns, computers, antiques, artwork or other items. Your policy probably has limits for certain categories of items (e.g., jewelry coverage limited to $2,000). If you have items whose value is in excess of their category limit, you will need to add a scheduled personal property rider, or endorsement, to your basic homeowners insurance policy to make sure that you would be reimbursed for their full value in the event of a loss. You can increase the value of a whole category if items (e.g., raise jewelry coverage limit to $10,000), or you can add riders that insure individual items for their appraised value.
Are you a new homeowner? Confused about home insurance?
Don’t take risks with your greatest asset. Call us today to talk about your home and get your questions answered. We can share quotes from numerous insurance companies so you can choose the best policy for your needs and budget.