Tips for Buying Homeowners Insurance (Part 2)

Once you’ve chosen an agent and a reputable insurance company, you need to make sure you have the right insurance coverage. 

A homeowners insurance policy will typically be a package of coverages including dwelling, personal property, liability, guest medical and possibly separate structure.  Most of the aspects within a policy have limits that are derivatives of the dwelling coverage.  When you’re deciding how much coverage you need for your home consider that you’ll need enough coverage to rebuild of your home if it’s destroyed in a disaster.  Keep in mind, insurance companies don’t insure the land your house sits on; it’s not going anywhere.  The market price is not relevant when figuring this cost.  Remember, although the value of a home on the market has decreased in recent years the cost to replace that same home has increased.  This can be attributed to the increased cost of fuel, wood and other materials.  A good calculation you can use is to divide the dwelling coverage you want by the amount of square feet in a home (i.e.  $500,000 / 3500 sq ft = $142.86 price per square foot). Your price per square foot should be around $120 to $160 per square foot depending on the grade of materials needed to rebuild the home.    Once your coverage is established, plan to review it at least once a year with your agent.

Buying Homeowners Insurance

So you’re buying a home.  Here are some tips you need to know about purchasing homeowners /hazard insurance.

When purchasing a home it’s important to secure your insurance as soon as possible.  This will help you avoid any surprises or last minute decisions.  Even if you’ve found a home you like but it’s not yet under contract you can get a homeowners insurance quote from an agent.   Checking with your current auto insurance company is a good idea but it’s also recommended that you get comparable quotes from other agents.  Not all insurance companies or agents are created equal nor is the coverage they quote.  Remember this is your home we’re talking about don’t risk working with someone you can’t look in the eye and voice your concerns.  You want to find an agent (and staff) you can feel comfortable with because this could be the beginning of a long business relationship.  You’ll want an advocate who is willing to go the extra mile on your behalf.

An insurance agent can also check the claims-filing history of the home you want to buy.  Some insurance agents will give you a copy of the home loss history report, also known as the CLUE report, just for asking.  A claim may increase the premium of your prospective home insurance by up to 30% for as long as three years.  It’s also a good way to find out if there have been any water or roof issues, even if they’ve been repaired.