Whether you're a first-time homebuyer or owner of multiple properties, it's important to protect your investment, its contents and liability related to the property. But homeowners insurance is not a one-size-fits-all product. Having coverage that guards against the risks associated with your home requires working with an insurance professional who understands your property and your exposures.
Menath Insurance has been providing clients with homeowners insurance for close to 39 years. Our personal insurance professionals know the right questions to ask in helping you determine what coverage is best for you.
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Here are some factors to consider when buying homeowners insurance.
What determines cost?
Credit Score: Insurance carriers will run a credit score check to determine whether you qualify for their program and if you do, which program tier you are eligible for. The credit score check is a soft hit, so it will
not impact your score.
Territory: Where your home is located will impact the price of your insurance. The territory determination is primarily impacted by the type of fire department your town has and how close you are to fire hydrants
and fire stations.
Condition of Home: The age of your home, its roof and electrical system, whether there is central heating, aggressive dogs, in-ground oil tanks, swimming pools, wood stoves, and if you have a business in the home all impact the rate.
Limits: How much insurance coverage for your dwelling, contents, and liability you purchase will impact the rate. There are minimum requirements as part of your insurance contract, but you should work with your agent to determine the right amount of coverage for you.
Discounts: Discounts vary from carrier to carrier. One of the discounts that may be available include a discount if your home and auto insurance are with the same carrier. Others include discounts for alarm
systems, renovated homes, and for being a non-smoker.
If you're taking out a mortgage to buy your home, your bank will require you to produce proof of insurance coverage at or before the closing. Some banks insist on escrowing insurance premiums as part of your mortgage and may require you to pay the first year of your insurance policy in full. If your bank escrows your insurance premium, you are still responsible for making sure they pay your insurance bill, so you may want to set up a reminder for yourself.
When determining the amount of coverage you need for the dwelling limit on your insurance policy, talk to your agent about Replacement Cost coverage. Your agent should be able to determine the amount it would cost to replace the dwelling, which could be substantially lower or higher than the amount you are paying to buy the home. If your location drives the market value higher than what it would cost to build the dwelling, the amount of insurance you need may be lower than your mortgage.
Your bank cannot require you to buy dwelling coverage as high as the mortgage. Even if the building is gone, there is still value in the land. If you are buying a dwelling that would be very expensive to replace but is in a location that drives down
the market value, you may need to insure the dwelling for more than the mortgage.
Deductibles are the amount an insured must pay for a claim before the insurance carrier pays the remainder of the loss, up to the policy limit. As an insured, you may have some choices in regard to the amount of the deductible. Other deductibles may be required by the insurance carrier, such as a wind or named storm deductible.
Flood Zone Concerns
Before you sign a purchase-and-sale agreement on a home, make sure you have your real estate or insurance agent check the flood zone for the property. Banks will require flood insurance in a high hazard zone (Zone A or V) and the cost for the insurance could be substantial.
If you are buying a multi-family home, make sure your insurance policy includes Personal Injury coverage.
You may also want to require your tenants to buy an HO4 (Tenants) insurance policy and provide you proof
of coverage. The insurance policy for your multi-family dwelling will not cover the contents or personal
liability of your tenants.
If you are buying a condominium, make sure you review the condo documents to understand what the
master policy for the building covers so you know how much insurance you need to buy as a unit owner.
If you will be renovating the home you are buying and will not be occupying it while under renovation,
make sure you discuss this with your insurance agent. After your policy is in place, any time you make any
substantial changes to your dwelling, notify your insurance agent so your coverage keeps pace with the
Homeowners insurance does not cover maintenance issues or wear and tear. Deterioration of a home’s condition could also make it difficult to find an insurance carrier to insure it and could also drive up the cost of your insurance. Make sure you protect your investment by taking care of your property.