Insurance Tid-Bits for First-Time Home Buyers

Do I need a policy before buying a property?

Technically, no.

Most states require drivers to possess auto insurance prior to taking the car off the dealer’s lot. But home insurance is different. You can legally own a home sans insurance.

However, if you need a loan to buy your home, your lender will likely need you to purchase home insurance as a way to protect its investment.

What coverage’s are included?

Standard home insurance policies typically include coverage for the structure of your home, its contents, liability, other structures (say for example a toolshed), and additional living expenses. Let’s break these down.

Structure: In the event your house is damaged or destroyed by a covered peril and needs to be repaired or rebuilt, your insurance can help pay for these expenses. Structure coverage is not the same as the amount you purchased your home. You need to set your structure coverage for the amount it would take to rebuild your home from the ground up.

Contents: This coverage can kick in should your belongings are damaged or destroyed. It’s typically set between 50% and 70 % of your home’s structural coverage. If you have high-value items, such as an extensive jewelry collection or rare pieces of art, there will probably likely be a cap on the repair/replacement value (between $1,000 and $2,000). To obtain additional coverage for high-value items, you can add a rider policy to your home insurance.

Liability: If someone else is injured on your property, the liability portion of your insurance policy can help pay for medical, rehabilitation, and/or funeral expenses, as well as legal fees in cases where the injured party sues you. Liability is generally set at $100,000 worth of protection. However, it’s a good idea to set your coverage between $300,000 and $500,000 – especially when your home includes attractive nuisances, such as a pool or trampoline – as medical and legal costs can add up rapidly.

Other structures: If your home has a detached garage or shed that may be damaged or destroyed by a covered peril, your insurance may help pay to repair or rebuild it.

Additional cost of living: In the event that your home is destroyed and needs to be rebuilt, this coverage can help pay for living expenses, such as hotel and food bills for the duration of time that you’re displaced. Consult with your insurer to see if this protection only covers you and your family for a specified period of time.
What are covered perils?

Standard home insurance policies can cover damage caused by fire, windstorms, hail, lightning, theft, vandalism, explosions, and riots. Typically, damage from water, such as that from freezing and bursting pipes, is also covered.

However, damage caused by floods or earthquakes is not covered. Those types of natural disasters require separate policies and ought to be purchased if you reside in a high-risk area, such as near a body of water or in California, where floods and earthquakes, respectively, are common.

How do I understand how much coverage I need?

Complete a home inventory. This is usually a complete list of everything you own and each item’s value. Home inventories ought to include photos or video of all your possessions and the amount you paid for them – if you have the receipts, that’s better still.

Make multiple copies of the list and keep it in a number of safe locations, for instance a safety deposit box. Having this inventory will allow your insurance agent to accurately recommend the amount of coverage you’ll need, and will help get the process started quickly if you have to file a claim.

What determines how much I pay?

When determining how much your insurance policy will cost, providers take into account:

Your credit rating.
Claims history, both your own and the claims history for the area in which you reside.
The location of your property.
The age of your house.
The costs associated with rebuilding your home.
Your proximity to a fire department and hydrant.
Whether you have pets or not. Having a dog, especially certain breeds, means you’ll require more liability coverage.
The coverage’s you end up picking.

How can I save money on insurance?

There are some tricks to lowering costs on your monthly home insurance premiums, but not all are overnight fixes.

Discounts. Most insurance companies offer discounts for policyholders. Bundling multiple policies, such as home and auto, with the same provider is probably the most effective ways to lower multiple policies. Providers also usually offer discounts for safety features, such as security systems. Equipping your home with these additional features may help you keep extra money in your pocketbook each month.
Raise your deductible. Raising your deductible (the amount you agree to pay toward a claim before insurance takes over) will result in lower premiums. However, don’t set your deductible so high that it would cause you financial hardship if disaster strikes. For example, for those who can’t afford to pay $1,000 out of pocket at any given time, set a lower deductible.
Improve your credit rating. Most insurance companies use credit score as an indicator of precisely how likely you are to file an insurance claim. Research indicates that those with low credit scores were more likely to file claims compared to those with high credit scores, who can afford to tackle some repairs or replacements on their own. Improving your credit score can ultimately decrease your premium payments, as you’ll become less of a risk to insure.

How do I choose a provider?

Shop around. All insurance carriers are different when it comes to coverage and price. The best way to find the right provider for you is to get quotes from several companies and do a comparison as opposed to making a rash decision. Nick & Cindy Davis work with several insurance providers here in the Tampa Bay and Surrounding Areas that can assist you. We are always available at 813-300-7116, or you can simply click here and we will be in touch.