Home Buying 101 - Step 11: Shop for Homeowners Insurance
April 23rd, 2007 categories: Home Buyers
This is the eleventh post in a series of twelve on buying a home. Click here for other posts in this series.
Once the home/condo has passed inspection and any repair items have been negotiated, you can begin to shop for homeowners insurance. Lenders require that you carry homeowners insurance but you can still shop around for the best rate and coverage. You will need to have proof of an insurance binder at closing. Here are some things to consider:
According to the Federal Citizen Information Center, you may be able to save money using some of these tips.
- –Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
- –Ask your insurance agent about discounts. You may be able get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire retardant roofing material. Persons over 55 years of age or long-term customers may also be offered discounts.
- –Insure your house NOT the land under it.After a disaster, the land is still there. If you don’t subtract the value of the land when deciding how much homeowner’s insurance to buy, you will pay more than you should.
- –Don’t wait till you have a loss to find out if you have the right type and amount of insurance.
- –Make certain you purchase enough coverage to replace what is insured. “Replacement” coverage gives you the money to rebuild your home and replace its contents. An “Actual Cash Value” policy is cheaper but pays only what your property is worth at the time of loss-your cost minus depreciation for age and wear.
- –Ask about special coverage you might need.You may have to pay extra for computers, cameras, jewelry, art, antiques, musical instruments, stamp collections, etc.
- –Remember that flood and earthquake damage are not covered by a standard homeowners policy. The cost of a separate earthquake policy will depend on the likelihood of earthquakes in your area. Homeowners who live in areas prone to flooding should take advantage of the National Flood Insurance Program at www.floodsmart.gov.
For more detailed information, you can visit this link at Federal Citizen Information Center’s website, which will give you additional tips on how to save on your homeowners insurance.
Lastly, one question I’m asked often is whether shopping around for insurance will hurt a buyer’s credit score. The answer is probably not. Your lender will recognize the fact that you need to buy homeowners insurance before you can close and that the insurance companies will runa credit check on you. As long as the inquiries are of a similar nature and are made within a limited period of time, buyers should see no negative impact on their credit.
