Homeowner insurance is required by lenders prior to closing on a home loan. Many home buyers will simply go with whatever insurance agent their real estate agent recommends to them. While we would always hope the real estate agent has their clients best interest in mind, it is more common than not that the real estate agent is simply passing a "hot lead" to one of his buddies in hopes that the insurance agent will reciprocate in the future. Please keep in mind that it is always a good idea to shop around for the best homeowners insurance policy, as insurance companies premiums can vary widely from company to company.
Below you will find helpful information designed to save you time and money in understanding homeowner insurance:
Determining Your Homes Insurability:
You will need to provide the following information in order to determine your homes insurability:
• Year the home was built.
• Homes square footage.
• Type of roof on the home.
• Address of the home.
• Is the basement finished.
• In older homes – the age of the plumbing and electrical.
• Number of claims over the last 5 years
How Much Home Owners Insurance Do I Need?
Insurance agents use what is called a cost estimator in order to figure cost replacement estimates. This ensures that your home is insured for the correct amount.
Keep in mind that you will only need to insure the home and the valuables inside of the home, but not the cost of the land underneath the dwelling. If you have a large lot that your home sits on, you will most likely receive an insurance estimate for much less than you paid for the property. This is simply because it is not necessary to insure the land underneath the home.
Your insurance agent will issue the "replacement cost coverage" on the home. This means that the policy is issued for additional replacement coverage on top of the insured amount. This protects a homeowner from having to pay additional out of pocket construction costs to rebuild. Due to inflation, building material price increases, or any number of reasons, it can cost more to re-build the home than what you originally paid for it. For example, if the homes insured for $ 400,000 and the company has 125% replacement cost coverage, the homeowner would have a construction costs cushion of an additional $ 100,000.
How Do Deductibles Work?
Your insurance deductible is the amount of money that you would have to pay out of pocket before your insurance begins picking up the tab for a loss. You can generally choose your own deductible amount which can range from $ 250 to $ 5,000.
Typically, you can save money on your monthly premium by keeping a higher deductible on your homeowners policy. For example, If you increase your deductible up to:
$ 500 – you can save up to 12% on your monthly premiums
$ 1,000 – you can save up to 24% on your monthly premiums
$ 2,500 – you can save up to 30% on your monthly premiums
$ 5,000 – you can save up to 37% on your monthly premiums
You just need to keep in mind that you will need to be able to afford the higher deductible in the event you ever need to file a claim.
Other Types of Homeowners Insurance Policies …
As part of your standard homeowners insurance policy, you will normally have Liability Insurance included. Liability insurance covers you in the event of lawsuits or claims resulting from bodily injuries or damage sustained by other people on or near your property. An example would be if a person walking on your porch slipped on ice and broke a leg. Your liability coverage would pay for the medical costs.
Standard liability insurance coverage as part of your homeowners policy is $ 300,000. This covers you for up to $ 300,000 in claims or costs incurred by another party. Liability insurance is rather inexpensive to increase the coverage if you desire. An additional $ 200,000 in liability coverage ($ 500,000 total) would normally run about another $ 20.00 per year. Some people choose to increase their liability coverage to $ 1 million, which can generally be purchased for only an additional $ 300 to $ 500 per year.
Keep Up On Costs …
It is wise to keep on top of how much your homeowners insurance is costing you, and to shop around every year or two to make sure you are getting the best deal. You sometimes may be surprised at how much you can save just by comparatively shopping insurance companies.