Buying a new home is one of the most complicated purchases consumers may make in their entire lifetimes. It is complicated by the fact that it happens relatively rarely over the course of time, and homebuyers develop little skill in the aspects involved.
One of the most common decisions associated with purchasing a home is acquiring the appropriate amount and type of homeowners insurance. This, too, is often done infrequently as homeowners will often secure insurance at the time of purchasing their home, and unless they have a claim, will tend to forget about it. This is particularly true if the insurance premium is included along with the mortgage and/or bundled with property tax payments. Policies become “invisible” to consumers until they become needed, and by then, they may find coverage inadequate.
Consumer Reports notes how insurance companies will include, or even later add language to policies, that over time, transfers more risks to homeowners. This most often occurs with major, weather-related claims. The consumer magazine notes that while homeowners may believe they have a $500 or $1500 deductible, the insurance provider will include language that ultimately has the homeowner responsible for 5% or more of the total damage in a major weather-related claim. For a homeowner who sustains $250,000 damage to a home, that can mean an additional $12,500 out of pocket above and beyond their deductible.
This is just one example of why it is so important to have solid knowledge of how to buy insurance for your new home.
Know What is Required
Homeowner's insurance doesn't just protect the property owner, but it also protects the interests of the lender. Therefore, the first step in purchasing Belgravia homeowner insurance is knowing what your mortgage lender requires you to carry. This will serve as the very minimum you will need to meet your obligations to your lender. From there you can decide what additional coverage you may desire and can afford.
This may sound elementary but it is surprising how many consumers will simply go with an insurance broker that is recommended by their finance company or real estate broker. New home buyers have every right, and should, shop around for homeowner's insurance. Payments should also be kept separate from taxes and mortgage payments. This will keep the homeowner better connected to their policies and any changes in rates and/or conditions. It also keeps coverage more “top of mind” when renewals occur and when it may become prudent to shop around and compare once again.
Know What Isn't Covered
Many homeowners are often surprised after the fact, that they are not covered for certain calamities. These can include floods, earthquakes, and other natural disasters. In some cases, even issues like backed-up sewers may not be covered. Once you know what isn't covered, you should seek out separate coverage or “riders” that can be included in the policy to better protect the investment. In addition, care should be taken to make sure outbuildings and contents are appropriately covered.
Take Advantage of Steps That Can Be Taken to Earn Discounts
Many insurance providers offer discounts to homeowners for taking relatively simple steps. These may include:
- Installation of smoke detectors
- Installation of Carbon Monoxide detectors
- Security cameras
- Bundling home insurance with auto insurance
- Paying premiums annually, semi-annually or through automatic monthly payments
The Insurance Information Institute also has other ways consumers can lower home insurance rates.
Understand Basic Insurance Terminology
Taking the time to understand basic insurance terms like deductibles, replacement value, liability and policy limits will go a long way in helping consumers understand what they are and aren't getting in their home insurance coverage. Working with a licensed broker with a solid reputation can also be extremely helpful.
By Justin Havre