We hand you the keys to this important coverage
While many types of insurance are optional, homeowners insurance is essential coverage.
Even so, the Insurance Information Institute estimates that around 3.5 to 4 million homes are uninsured in the U.S. While this is “only” around 5% of the total homes in the country, it’s still a figure that’s far too high – and so is the risk and cost of being uninsured.
Your mortgage provider will more than likely require you to have homeowners insurance in place from the very beginning of the purchase process. The home is essentially theirs until you’ve paid for it, and they want it protected.
If you’re getting ready to buy your first home, here are 5 tips on homeowners insurance, as well as a recap of just how it will protect you.
Understanding homeowners insurance and what it covers
The name “homeowners insurance” can be deceptively simple. It would be nice to think that once this coverage is in place, any hardships your home endures will be covered by the policy. In reality, it’s a little more complex.
A basic policy should cover your home if it’s vandalized, incurs fire damage or is hit by lightning, hail, wind, hurricanes, or other forces of nature. Your home’s contents such as furniture, appliances, jewelry, and clothing (among other things) will also be covered from damage or theft, up to a certain value. If any item is of particular value to you, then adding more insurance to protect it is recommended.
Not every natural disaster is treated equally, however. Consider the risk of damage from earthquake or floods. Both are devastating to homes and are common, yet coverage against them is not common under standard homeowners insurance. Special and separate policies are required for both. If your home is in an area where these events are more likely, adding extra protection is a worthwhile expense.
Homeowners insurance also protects you from forms of personal liability. Simply put, if anyone comes to harm on your property, your policy will help pay for their expenses. If you or a family member causes any harm on a neighbor’s property, your insurance may also cover you there.
Know what defines a “home” under homeowners insurance
In many instances, a home is a standalone building, often with a driveway or surrounding fence. In other instances, a home may also have a garage, a conservatory, a shed or other related structures that are attached to it or stand alone. All should be covered by your homeowner’s insurance in the event of damage.
If a secondary structure on your property is being used for business purposes (as an office, for example) then you’ll have to speak to your insurer about it separately. If a car parked in an indoor garage is damaged or stolen, homeowners insurance won’t extend to cover it: that’s a matter for auto insurance.
With these basics covered, here are our 5 tips:
Consider where your home stands
Location, location, location is the golden rule in real estate. It bears repeating when it comes to buying your first home and factoring in your insurance. As we mentioned earlier, natural forces can wreak havoc. Florida can attest to that as the most expensive state in the country for homeowner’s insurance rates. Recent figures place rates close to $7,000 per year.
If you’re considering buying in a higher risk area (such as close to a coastline), you’ll be looking at higher rates on your home insurance. Whether your home is near (or far) from emergency services like the fire department is another consideration that can potentially lower or increases your rates.
Consider crime rates around your future home. A property’s proportionate risk will directly impact its premiums. If your next neighborhood faces risks from nature or crime, however, you can help reduce your rates by installing things like home security systems or storm shutters.
Be aware of the condition of the home
If you want to make the most of your homeowner’s insurance, have it thoroughly inspected.
Inspections reveal any problems with electrical wiring, pest problems, or water risks, and can also shed light on any past issue the home may have suffered. If you’re unaware of issues, you’re risking insurance trouble down the line. The more you know before you buy the home, the greater the chance of having truly helpful homeowners insurance.
A thorough inspection will show you what needs maintenance; a valuable lesson for first-time homeowners. Standard policies don’t normally cover you for the results of outstanding issues you could have repaired yourself. If your first home is particularly old, you may require a modified coverage form.
The type of home matters
Your first home could take many shapes, including:
• A townhouse
• An apartment
• A condominium
• A detached home
Each of them will involve different forms of homeowners insurance. Condo owners will require insurance for possessions, walls, floors, and ceilings. Detached and townhouse owners will pay more for any external structures on their property.
Speak to your insurance advisor about how the various designations affect the insurance you’ll receive. Whichever one fits, you’ll want to be sure it includes Loss of Use, a policy that will cover your living expenses if you must leave your home while it’s being repaired.
Factor in your credit rating
Have you checked your credit report recently? If not, you’re entitled to once a year and here’s a free way to do it. Knowing your credit status is important because it’s very likely your insurer will, too. In all but a few states, insurers will take your credit history into account when putting your homeowner’s insurance premiums in place.
Credit reports can be notoriously inaccurate. Every prospective homeowner should ensure their report is as precise as possible. If you have any outstanding or unaddressed debt, taking steps to rectify the situation will cast you in a better light with insurance providers.
Use time wisely before choosing homeowners insurance
A last-minute decision can be costly when choosing insurance. Your time and your options will be limited as you try to get this vital part of the process in place. Buying your first home can be simultaneously exciting and overwhelming. Those two emotions can make you lose track of time, or waste too much of it in confusion.
If you’re house-hunting in Florida, don’t be discouraged by policy rates. They’re an average and, though high, can cover and return many times their cost. Your needs are unique, so one-on-one time with a qualified insurance professional before you buy is essential.
Avante Insurance is a South Florida family owned and operated agency providing an array of insurance services to meet the individual needs of our customers. For more information or to request a quote, contact us today.