Decisions Now to Protect Your Home Later
Home insurance for new owners may be less intimidating than buyers expect. Contracts and legal codes often obscure a simple fact: home insurance serves to compensate owners in moments of unexpected damage to their properties. However, as a tool to protect a buyer’s largest financial investment, it should be fully understood well before it is ever put to use.
Experts encourage new homeowners to compare insurance rates before making a final commitment. This process has grown especially easy now that websites can help pinpoint customer needs. In fact, some websites will even offer price comparisons based on basic information, such as home location and size. For a more personal touch, homeowners can also contact a local insurance provider and meet with a representative.
Crucially, mortgage lenders often require a borrower to demonstrate a minimum level of home insurance. Buyers should also note that while lenders may not demand insurance for condominiums, neighborhood covenants may demand some coverage. Fortunately, borrowers remain masters of their insurance selections, but always double check the least expensive policies for important exceptions or gaps in coverage.
Even the Kitchen Sink
Basic policies will provide compensation in cases of damage incurred by fire, smoke, ice and theft. In addition, liability for persons injured on the owner’s property may cover legal or medical fees up to an amount stipulated in the policy.
Beyond these basics, consumers may want to add coverage depending upon their respective needs. For instance, while coverage may extend to a limited number of the home’s contents, expensive items not covered often can be added to the overall policy. Homeowners can purchase replacement coverage, which comes in two varieties. “Actual cash value” will reimburse the item based on its age, while “replacement cost” will cover the expense of purchasing a new item.
Flood coverage is also often overlooked by homeowners who assume that their policies cover this type of disaster. Homes located in flood plains remain particularly at risk. Contact the Federal Emergency Management Agency (FEMA) to find out if a given home is at risk and to what degree that home’s particular location may be prone to flood damage.
Title insurance is another option. Though relatively new, this option compensates legal and other fees if problems arise regarding the property title. Such a possibility seems remote, but issues can arise even with new construction projects.
Save Money Before It’s Too Late
Finally, a few simple steps can lead to significant savings on the final cost of home insurance. For example, many providers offer more than one type of insurance. To encourage customer loyalty, they will provide discounts if the homeowner adds home insurance to auto or life insurance from that company. Adding security measures such as an alarm system or additional locks may also meet provider requirements for a reduced rate. In addition, raising a policy’s deductible can often reduce premium payments. Finally, maintain good credit – providers always want to minimize risk, and this is one way to demonstrate reliability.