Buying a home is said to be the single largest financial commitment most individuals will make during their lifetime. Too many, purchasing a homeowner’s insurance policy is an afterthought compared to the exhaustive amount of time and energy one dedicates towards the process of buying a house.
What is Homeowner’s Insurance and Why is it Important to You?
Homeowner’s insurance covers damages to your home, including repairs and/or replacements, following a major event that is covered in your policy. Typically, these damages are incurred by an event outside of the homeowner’s control, such as flooding, fire, vandalism, weather, etc. As policies cover the main structure of the home, they can also cover components within the home if they were damaged by a covered event. For example, coverage for repairing or replacing basic utility components, personal property, and/or medical expenses in the event an individual endures an injury while on your property.
Why waste your efforts in finding and purchasing your dream home without making the same commitment towards finding the right homeowner’s policy to protect your investment?
In our guide, we layout five easy-to-follow steps for any homeowner looking to find and buy the best homeowner’s policy that will match what you want to cover while staying within your budget.
Research and Think About How Much Coverage You Need
Standard homeowner’s policies may not include adequate coverage for repair or replacement of your home and possessions. For instance, a typical homeowner’s policy may not cover items such as valuable jewelry, artwork, or other collectibles. Additional coverage is often required for things that pose as a potential liability risk such as a swimming pool. In general, if the cost of repairing in your area is higher than average or you have particularly expensive goods, you should consider buying extra coverage since most plans are flexible to meet individual needs.
Many new homeowners are unaware that flood insurance is not always included in the typical homeowner’s insurance policy. Flood coverage depends on the location of your home and whether the insurance company includes it as part of their homeowner’s policy program. In any case, you will want to research the area of your new home to see whether you could be susceptible to this environmental factor. If you believe you are in an area more prone to flooding events and your policy does not provide coverage, you might be qualified for coverage under the Federal Emergency Management Agency’s National Flood Insurance Program.
When deciding the amount of coverage you would like, start by estimating the replacement cost for your house and any exterior buildings or structures, such as a garage or pool. Next, build an itemized inventory list of your belongings, both indoor and outdoor, including furniture, clothing, appliances, collectibles, musical and/or sporting equipment. Don’t forget to include items that have been safely stored away, such as linen, jewelry, and family heirlooms.
As you begin creating an inventory list, make sure to provide as much information as you can for your insurance company. For instance, remembering when and where you purchased an expensive good will make it easier to estimate the cost of replacement when filing a claim. Consider video recording a walk-through of your house, including each room and your possessions, to provide a visual representation of your inventory.
Additionally, when listing items such as clothing or a washer/dryer unit, factor in replacement costs, not the price you actually paid for the item. Because of inflation and other mitigating factors, the cost of replacing an item can change rapidly. This means that even an older appliance could cost much more to replace today than what you originally paid for it.
A licensed insurance agent could be a useful tool if you feel the project is overwhelming and want to seek professional help to guide you through the process. Another great tool to utilize is the internet, which is full of insurance-related information and resources for new homeowners.
Find a Broker like PolicyGenius Who Will Shop the Market for You
An online insurance broker functions as a liaison between the insurer and you. Providing your background and financial standing, they are equipped to combine your information and their insurance expertise to compare quotes between multiple insurers then recommend a policy that fits your needs within your budget. Online insurance comparison sites such as SelectQuote, NetQuote, and PolicyGenius are extremely useful tools to ease the process.
For instance, PolicyGenius is an online broker service tool that is client driven and focuses on simplifying the process of shopping for insurance. PolicyGenius helps customers find the best rates by working with and connecting consumers to homeowner’s insurance companies across the country. One of PolicyGenius’s most reputable amenities is that it can match new homeowner’s with insurance options in all 50 U.S. states. Although it’s only available online, the process is easy and removes a lot of the inefficiencies of shopping for insurance.
PolicyGenius offers an easy-to-use service that will quickly match customers with a homeowner’s insurance company. Users fill out an online form, providing information about the policyholder and the home they want to cover, then matches respondents with insurance providers that fit individual needs, including information that allows consumers to compare options and policy rates.
The primary advantage of shopping for home insurance policies through a service like Policygenius is saving time by performing the groundwork of finding plans and receiving quotes from various insurers at once, showing them to the consumer who then has the ability to compare prices effortlessly. This service offers a more simple and efficient way to get affordable homeowners insurance quotes by receiving individual quotes from several companies.
Although some broker services will charge a service fee, it may be worth the investment considering the amount of time and money they can save you. There is a chance you will spend less overall, even when the service fee is factored in. For instance, let’s say a broker charges you a $200 service fee, if their work produces an annual cost savings of $200, over a three-year period your overall savings would equal $400.
When Shopping, What Information Will My Agent Need to Get My Rates
In order for your insurance agent or broker to produce an accurately estimated quote, they will generally need the following information.
House Address, Size of Home, and Year Home was Built – The address of the property (home) being insured, the square footage and number of rooms, and the year your home was built.
Insurance Appraisal – Needed to assess the home’s complete restoration value if damaged or destroyed. This can be accomplished by referring to a recent homeowner’s policy, of hiring multiple contractors and/or an appraiser to individually determine the worth of specific parts of your home.
Recent Renovations or Updates and Construction Details – Needed if you have recently made upgrades or renovated, such as new roof installation and security system. Sharing this information, including building materials used, ensures the insurance quote accurately covers the estimated value of your home.
Past Inspection Reports – If available and applicable, summaries or notes from a previous insurer’s inspection may be helpful when considering coverage options.
Previous Insurance – If you are purchasing homeowner’s insurance for the same house you have lived in but under a different policy, providing your previous insurance policy to your agent or broker is an easy way for them to gather the information they need, such as: square footage, roof age, electric and plumbing specifications, and distance to nearest fire department.
Lender Requirements – If your mortgage lender requires additional coverage, such as flood insurance, communicate this information with your broker.
Additionally, you will need to provide a list of the individuals that will be living in the insured home, and whether you, as the homeowner, will consider the house a primary or secondary residence. If you plan to rent or utilize the house as a home office, your insurance agent or broker can provide suggestions to maximize tax deductions available for properties filed as rental or home office space.
Date of Birth – Used to access your insurance history by agent or broker. Also factored in when calculating premium; older adults generally have lower premiums.
Occupation – Qualifying occupations are eligible for certain discounts or group rates.
Social Security Number – Used to access credit history to determine rates; lower credit scores typically lead to higher premiums.
Property History – Addresses of prior residences are required if you are seeking coverage for a house that you have lived in for less than two years.
Liability Questions – Insurers will require information regarding potential liability risks such as pets, trampolines, tree houses, or pools (in- or above-ground).
Evaluating Homeowners Policy Options and Riders… BUY IT!
Once you have provided your insurance agent or broker with all the necessary information, the next step is to compare quotes and pick your home insurance policy. Make sure to evaluate all suitable policy options so you can do a thorough comparison. Even though the cheapest option may be the most appealing, without reviewing the details of your potential insurance policy, you could end up with a policy that does not provide the coverage you need.
You may also find it beneficial to research the background of the insurance company. Regardless of how great the insurance policy may look on paper, ensure the company is financially stable by reading through consumer reviews and double-check ratings or scores provided by private entities such as Consumer Reports.
State-mandated homeowner’ insurance does not exist, and some mortgage lenders only require insurance coverage for 80% of your home’s replacement value. However, being underinsured could be financially detrimental if your home requires a full rebuild. It is also not worthwhile to purchase more coverage than what you need.
For example, believing your coverage should equal the market value of your house is a mistake. Land remains even after a disaster, so the value of your home includes the land your house is built on. Because of this, the market value of your home is usually higher in most situations than the cost of fully restoring it.
In general, there are several types of homeowner’s policies that have become the leaders in industry standards. There are various levels of protection and coverage can be customized to fit the homeowners needs and type of residence.
Basic Policy Form – The most basic homeowner’s insurance policy that only covers home and personal property if damage or loss is a result of fire, smoke, hail, lightning, explosion, vandalism, etc. Coverage involves cost value of home replacement and actual cash value of personal property.
Broad Form Policy – Homeowner’s policy that only covers home and property if damage or loss is a result of events specifically listed in policy. Coverage is slightly more inclusive than basic policy form.
Special Form Policy – Homeowner’s policy that provides coverage for home under all circumstances, unless there are specific exclusions named in the policy. Additionally, personal property is covered, only if damage or loss is a result of an event listed in the policy.
Comprehensive Policy – Homeowner’s policy that covers home and personal property against all events that result in a damage or loss, unless otherwise specified in policy. Generally, the most expensive policy as it provides the most coverage of all the policy forms as it covers the cost value to replace both home and personal property.
Modified Coverage Form Policy – Homeowner’s policy that covers home and personal property if damage or loss is a result of specific events listed in the policy. Designed for older homes that cost more to rebuild then marketed value; policy covers actual cash value of home and personal property.
Preparing Your Home for The Insurance Company’s Inspector
It is common practice for the insurer to conduct a property inspection to make sure all factors included in coverage quote have been accurately reported. Your adjuster will take note of mistakes or omissions if any home or homeowner details were wrongly reported or there was a failure to mention specific information in your homeowner’s application.
There are a few things you can do to get ready for a homeowner’s insurance inspection. The chance being caught off guard during the inspection is to perform a little prep work before your scheduled appointment.
Review of Exterior Home Components
Review of Interior Home Components
Overall, the goal of a home inspection is to assess the risks and replacement costs of your home. Once you have completed the necessary steps to insure your home, you can rest easy knowing that you took the time to invest your energy in choosing the right homeowner’s insurance now to save yourself from suffering potential financial damage due to an unforeseen event in the future.