05 Nov Insurance Tips for First-Time Home Buyers
When you’re purchasing your first property, you will quickly find out that it can be an equally stressful and exciting time. There is a lot to think about, from financial paperwork to moving to protecting your new property. Because there is so much to think about, home insurance often falls by the wayside. To help, we’ve rounded up some must-know insurance tips for first-time home buyers.
- Do your research
If you are purchasing your home through a mortgage, your lender will most likely require you to take out a homeowners insurance policy in order to protect their investment. While you know you need coverage, it’s worth understanding what home insurance covers and what it can do for you if the worst should happen.
It’s important to understand the basics of home insurance so you can purchase a policy that meets your needs. A standard policy provides coverage to protect you from the expense of a dwelling, personal property, or liability loss. Your insurance will also cover other structures on your property, such as a fence or detached garage. If your home becomes uninhabitable, the loss of use coverage will cover additional costs to maintain your normal standard of living, including hotel room bills, food, and additional transportation.
- Replacement cost vs. market value
Your insurance will traditionally be based on the replacement cost of your home. Replacement cost is the total cost to rebuild your home with similar types of materials. You should ensure that this amount is enough to cover a total loss. A market value policy, also known as actual cost value, only covers up to the current cash value of your home. Keep in mind that the cost of clearing debris and rebuilding your home will most likely be greater than its cash value, so a market value policy will only cover a portion of these expenses.
- Spot the gaps in coverage
While your home insurance works hard to protect your home and property, every policy will have its limitations. It’s important to fill in coverage gaps that can affect your unique needs. For example, flood, earthquake, and sewer back-up damages are not typically covered in a standard home policy. If your home is vulnerable to these issues, then you should secure additional coverage.
- Bundle your policies
Often, insurance companies will offer you a discount on premiums if you take one more than one insurance policy with them. To help you save money without sacrificing coverage, consider bundling your home insurance, auto insurance, and life insurance with a single insurer.
- Know when to use it
Your home insurance coverage is meant for big losses. Although it’s tempting to cash in on your policy when minor incidents occur, this can do more harm than good to your premium. For example, if you have a $1,000 deductible and you put it in a $1,200 claim when the roof leaks due to weather, then your premium may rise even though the insurer only paid $200 towards the damage. Many small claim filings can come back and create problems. Homeowners insurance is to cover large catastrophic losses, not maintenance.
- Keep it up to date
Once you move it, it’s easy to forget about home insurance. However, it’s essential to review your policies every year and keep it up to date. If you’ve made an addition to your home, bought or sold any high-value items, or improved home security, let your insurer know so that the policy can reflect the changes.
These are just a few tips for first-time homebuyers on how to secure reliable homeowners insurance. Once you have a policy in place, be sure to review it regularly and stay in contact with your insurance agent. A little preparation now can go a long way in protecting your pocket and property.