Helpful Hints For Buying Homeowners Insurance
If you’ve never purchased a home before, the process can certainly be a bit overwhelming. With so many other pressing concerns that need to be dealt with, it is easy to forget all about homeowners’ insurance. When you are in the process of selecting a policy, these helpful hints will guide your decision.
- Speak To Multiple Companies and Shop Around
Your mortgage lender will typically require you to purchase homeowners’ insurance, so be sure to contact at least three different companies who can provide the necessary coverage. Depending on the terms of your mortgage lending agreement, you may also have to purchase additional forms of coverage, such as flood insurance.
When speaking to insurance companies, compile as much information as possible about coverage, prices and reviews. You’ll want to seek the best value, as opposed to holding out for the lowest price. Excellent customer service is also a must.
- Learn More About Escrow
In most instances, the homeowner should escrow their insurance payments with their mortgage payments. Most homeowners typically tack their monthly insurance payments on top of the mortgage check that they are responsible for writing each month.
With an escrow account, you can rely on the lender to pay insurance premiums and property taxes on your behalf. Lenders enjoy this policy, because it lets them know that the premiums are being paid, but homeowners should also remember that they will likely need to provide a year’s worth of insurance payments at closing.
- Know Your Levels Of Coverage
Purchasing the right amount of coverage boils down to knowing the particulars of each level:
HO-2: This is a more broad policy, one that protects all 16 perils named.
HO-3: Another broad policy, albeit one that only protects against the perils named and does not provide coverage against those that have been excluded.
HO-5: This policy is favored by homeowners who have purchased a brand new home that is well maintained. All perils are covered, except for those that are specifically excluded.
HO-6: HO-6 policies are purchased by those who are moving into condos and co-ops. The actual property itself is insured through the association, while liability insurance, personal property insurance and unit improved coverage are offered by the policy.
HO-7: This is an HO-3 policy for those who owns motor homes.
HO-8: HO-8 policies are similar to HO-2 policies, but are geared towards older homes. Actual cash value is all that is covered.
- Know Your Glossary Of Terms
Deductible: The amount spent by the homeowner before their policy kicks in.
Liability: Coverage that will pay the medical bills of someone who is injured on your property, typically out of negligence.
Personal Property: Coverage that protects tangible items within the home.
Actual Cash Value: These policies provide you with monetary compensation for your dwelling or your personal property.
Replacement Cost: This insurance pays the cost of property replacement, but it is important to know if the maximum value has been set high enough before signing on the dotted line.
Premium: The annual or monthly amount you pay for insurance.
Riders: A policy included in your overall coverage package that refers to specific items, such as jewelry and art work.
Sub Limits: Most homeowners’ policies have limits, as well as sub limits. For example, a $400,000 insurance policy may include a sub limit of $200,000, i.e. 50 percent of your dwelling’s coverage.
Any confusion about these terms and how they affect your coverage? Be sure to develop a full understanding for each of them before making a final decision on buying homeowners’ insurance. Ask plenty of questions, so that you know you’re getting the policy that best suits your needs.