When people buy a car, they usually just look at how much the vehicle will cost. They will negotiate with their sales person on the price to reduce their monthly payments. Once they come up with an agreed amount, the buyer can walk away happy. That is until they get their insurance quote. That car now has an increased monthly payment due to the auto insurance policy.
The same thing can happen when buying a house. Homeowner policies do not differ as much as auto policies, but coverage can be different. If this is the time for you to get a new homeowner insurance policy, there are many aspects you should educate yourself on before you buy your house.
Questions to Consider When Shopping for Your Policy
Your mortgage lender may have a pre-selected homeowner insurance company they work with. Some people choose to take this at face value and sign up with that company. In states where there are not a lot of companies to choose from, like Florida, buyers can be grateful that they have coverage.
Shopping around for homeowner insurance can save you money and give you the protection you need. Some policies may look less expensive at first, but if you review the policy, you could have gaps in coverage that you may actually need.
When you look around, consider the following questions when shopping. The goal is to get the coverage you need at an affordable monthly payment.
- What is the replacement cost of your home? Keep in mind your purchase price and the cost of rebuilding the house are usually two different things.
- What is the age of your home? Newer homes usually have better rates than older ones. If you choose to buy an older home, there are policies that will pay a percentage above what the replacement value is.
- What is the value of your personal possessions? A great way to answer this is to create an inventory list of your clothing, jewelry, art, and other valuables that you would want covered if disaster hits. Submitting this list to your insurance company ahead of time, can save you from future complications if disaster hits. By having this list on file, your insurance company will have proof of what needs to be replaced.
For your higher priced items, like art, your homeowners coverage may not cover the full value. You will need to look into getting a separate policy to insure these high priced items.
- What are the conditions in the neighborhood? Insurance companies will look at the surrounding area to determine your policy costs. Homes that are near higher risk concerns can be more expensive due to the probability of damage or injury. Living in a hurricane flood zone, living near an industrial zone, or other factors are taken into account
- What discounts can you take advantage of? Most insurance companies offer discounts for things like adding a security system. These discounts can quickly add up to saving you a significant amount of money per month. Fixing up your home to be more damage and accident resistant can benefit you. No, you don’t have to line your walls with foam, but fixing the uneven driveway can save you from possible tripping injuries.
- Does the insurance company offer multi-policy discounts? Many bigger insurance companies have the ability to offer homeowner, auto, and other coverages. If you buy you consolidate your various insurance policies to one company, they may have discounts you qualify for.
- What is the financial health/stability of the insurance company? Besides saving money, you want to make sure that if you need the policy to pay out, the insurance company is stable enough to take care of you. Check independent rating sources like Standard & Poors, A.M. Best, or Moody’s to find out how solid the company is.
- What type of damage is not covered? It is important to know what type of damage your insurance company will not cover. When speaking with an insurance representative, have a detailed conversation about this. Have them be specific. You may be covered for water damage, but after it is cleaned up, will they also take care of possible mold damage?
Also talk with your insurance rep about your area. The home you want to buy may be located in a region that has a history of earthquakes, hurricanes, or flooding. Buying the additional policy to cover these events are not normally included with standard homeowner policies.
- Does the policy have enough liability coverage? If someone gets hurt or killed in your house or land, you can be ultimately responsible. You will want financial protection from medical costs or court ruled damages. This type of protection can save you from liquidating your retirement, children’s college fund, or losing other assets you have worked hard to build.
There are many other questions you can ask. The more you learn, the better of a decision you can make about which policy is right for you. Make sure you get everything you want in writing. Documented proof can protect you as much as the insurance company.
Roadblocks And Accuracy
- Some insurance companies will not cover you if you own certain breeds of pets: If you have a dog in the working class breeds, some insurance companies will not cover you. Breeds like Pit Bull Terriers, Rottweilers, and German Shepherds are a few of the breeds that can prevent you from getting coverage. Before you sign your contract, make sure you know if your insurance company has an issue with your dog’s breed.
- Be consistent with your application information: Get quotes from multiple companies to compare pricing and coverage. When you fill out the application for a quote, make sure you are entering the same information to get an accurate result. We recommend you write down your answers to avoid any changes.
- Credit scores do count: The insurance company looks at different things to determine your premium and deductible. Besides the house and where it is located, they will look at your credit score.
If your credit score is not the best, you could end up paying more per month. Ways to counter this is to raise your deductible amount to lower your premium payment. Also, have your policy reviewed yearly. Once the insurance company has an established payment history on you, they may have loyalty discounts you may be eligible for. As time goes on, your credit score could get better. By having a review, they could take your better score into account.
Shopping Like A Pro
The home buying experience can be long, frustrating, and confusing. The more you educate yourself, the better the experience will be. Key points to remember is to understand what is covered and what is not. Choosing an insurer on price alone can create gaps in coverage due to certain damage not being covered. Learning about the company’s financial health can give you an idea on how your experience with them will be.
One last thing to consider is to seek advice from your friends and family. If they have had to submit a claim through their homeowners insurance company, find out what their experience was like. Talk to neighbors to see which company they are with.
It is required by the insurance governing institutions that any complaints an insurer receives are registered with the state. Contact your state’s insurance governing board to learn about common issues that arise. Yes, every insurance company gets complaints. If there is a common occurrence about that company, you may want to know about it before you sign up.