Buying a new home is very exciting and for most people, it is easy to overlook home insurance in the rush to get their hands on the keys. However, nothing is more important for a first time home buyer than protecting the new investment. Actually, if you are obtaining a mortgage to acquire the home, you will likely be required to purchase a home insurance as component of the loan agreement.
Insurance, just like most other things involved when buying home, is a decision where you can choose from various options. To settle on the most appropriate decision, it is important to have fundamental knowledge on the cost of the policy and what the insurance policy covers. Here are insurance tips for new home buyers.
1. Research
Different insurance companies offer different policy terms. Do not simply accept an offer from the first company without considering what others can offer. You can use independent brokers and online comparison sites to compare prices and policies of various insurance companies.
Insurance companies will consider the following factors while recommending your policy
- Location of your home
- You claims history and the claims history of the area of your home
- Your credit score
- Age of your home
- Proximity to a fire department
- pets
2. Understand the Insurance Policy Cover
Most home owners’ insurance policies will cover both the structures of a home and the owner’s possessions. In addition, this insurance policy may cover living expenses incurred in an event where the home can be uninhabitable upon a given time.
There are terms you need to understand about your cover including:
- Liability Coverage. It covers civil liabilities arising from property damage, bodily injury, or other wrongs caused by inaction or action of the insured to the third parties.
- Structure Coverage. The structures of your home may be damaged by fire, storm, and wind among other perils. The insurance should pay the cost of rebuilding the structures of your home if the cause of damage is covered by your insurance policy.
- Contents Coverage. Most often, when a structure in your home is damaged, the contents inside the structure get damaged as well. This covers a certain percentage of the total value of contents damaged inside an insured structure.
- Living Expenses. If your home is damaged beyond habitable condition, the insurance company will be required to pay food and lodging expenses for you and your family members during the time of repair.
- Market Value policy. This is a type that allows for the settlement of a claim on the basis of the assessed market value of your home not its higher actual cash value.
- Replacement Cost Value. This covers the cost to replace or repair the building and personal possessions up to the policy’s limit which is more than the value covered by an actual cash value policy.
3. Do Not Underinsure
It is always very important to over-insure. The difference in the cost of an over-insured policy is usually insignificant compared to the cost you might incur on an event of damage to your underinsured home.
4. Bundle Up
Most insurance companies offer bundled pricing. If you purchase several policies together in a single package, you receive a discount on your policy.
