There are so many things to think about when you’re buying a home, and homeowners insurance might be something that’s seen as an afterthought. But it’s important to take the time to get the right policy. Here’s everything you need to know about getting homeowners insurance to protect your new home.
Mortgage companies require you to carry homeowners insurance to protect their investment in your home, but you can buy it from any carrier you want to.
Call at least three companies and get quotes that you can compare side by side. Don’t shop for the lowest price but shop for the best value. Compare coverage, price, and customer reviews. Weigh reviews about customer service heavily, since that’s exactly who you’ll be dealing with in a disaster situation.
An important note: Don’t take too long to shop around for a policy, or it can delay your home’s closing.
Make Sure You Get Adequate Coverage
Different home insurance policies offer different levels of coverage. Make sure you get enough coverage, but don’t overpay for coverage that you don’t need, either.
HO-2: This is the most basic level of coverage. It covers only the perils specifically named in the policy, and it does not cover your personal belongings.
HO-3: This level protects against all kinds of damage except for those specifically excluded in the policy. It covers personal belongings, though some situations are usually excluded.
HO-5: This policy level offers the same coverage as an HO-3 but extends all that coverage to your personal belongings, as well.
Other Things to Consider
- You may want to add additional coverages at an extra cost. You may want your sewer pipes that go to the street to be covered, or you may want additional coverage if your basement floods if the city’s water system backs up.
- You may be required to buy flood insurance (depending on the flood risk for your home), which isn’t usually included. Earthquake insurance is also usually separate.
- Keep careful records of the value of your home’s belongings. Some items, like expensive jewelry or art, may be excluded. Additional riders can be purchased to cover these items.
- Go for full replacement cost coverage: This means that the insurance company must replace your home or the item, ignoring the depreciation that came before the damage.
Understand the Details of Your Policy
Deductible: This is how much you have to pay before your insurance kicks in. The higher the deductible you pay, the lower your premium will be.
Premium: This how much your homeowners insurance costs, usually either annually or monthly, depending on your plan.
Liability coverage: This is how much your insurance policy will pay in medical or legal bills if someone is injured on your property.
Reimbursement for living expenses: If your house burns to the ground, you’re going to need somewhere to live while it’s being rebuilt. May companies provide coverage for your hotel bills, food, and rental car bills (if needed).
Sub-limits: These are limits on your policy for specific items. For instance, your personal property may only be covered up to 50% of your home’s value.
Be sure to ask your insurer about potential discounts. If you have smoke detectors, an alarm system, a sprinkler system, or fire-retardant roofing, you may qualify for a lower premium. Seniors also sometimes qualify for discounts, since they’re considered lower risk applicants. Just make sure to ask!