4 First Time Home Buyers Insurance Tips
Buying a home for the first time is exciting, but it can also be stressful and overwhelming. Your worries don’t end with choosing the right house in the best neighborhood. You also have to pay realtor fees, home inspectors, property appraisers, and also purchase homeowners insurance for the very first time. Fortunately, there are plenty of helpful tips for first-time homebuyers in the market for homeowners’ insurance.
You may wonder if homeowners insurance is even necessary. There is no question: homeowners insurance is an absolute necessity for home buyers. While it may not be required by law, your lender will likely include it in the underwriting agreement. If you own a home, you want to protect that home and the belongings inside.
Read on for helpful tips that will aid you in buying home insurance for the first time.
Tip #1: Understand What Homeowners’ Insurance Covers
Homeowners’ insurance protects your home in the event of a disaster. Different tiers of insurance policies cover specific circumstances, but the overarching idea behind homeowners’ insurance is to protect your dwelling and your belongings.
One major tenet of homeowners insurance is coverage against fires. As awful as it is to imagine your home burning down, house fires happen every day. According to the National Fire Protection Association, about 353,000 house fires occur each year in the US. Homeowners insurance does not just stop at fires.
Many insurance agencies and/or carriers offer three main types of homeowners insurance policies:
- a bare-bones policy that covers a handful of circumstances
- a more inclusive policy that protects your home from open perils other than exclusions and your belongings from named circumstances
- the most intensive policy that covers your home and belongings from open perils other than exclusions.
Open-peril policies do not require circumstances to be named to be covered. Instead, the policy explicitly details circumstances that are not covered.
The most common option for homebuyers is the second, which is called an HO-3 policy.
- Your home is covered as well as attached structures.
- Your personal property is covered under the named circumstances.
- Your liability is covered in the event that you or your pet injures someone or damages their property.
There are plenty of other covered instances under this type of policy as well. Additionally, always be aware of what your insurance policy does not cover.
Tip #2: Consider Separate Flood Insurance
While open-peril homeowners insurance policies will cover a great many events that can happen to you and your home, certain things are simply not covered by any policy.
Most insurance companies do not cover the following disasters under their homeowners insurance policies:
- Floods & Seepage
- Government actions (occupation of the property, for example)
- Nuclear hazards
- Mold damage
- Infestation damage
- Damage to the foundation
Floods are among the most destructive natural disasters, and they can begin quickly, with minimal warning. Arming yourself with flood insurance is one way to protect your home and belongings in the event of a flood.
Earthquakes and Sinkholes do occur even in low-risk zones. These perils are not included for coverage unless added to your home insurance policy by endorsement. However, you should check with your specific policy. If you are in a prone area, see if there are coverage options available to you.
Keep in mind that you do not want to be over-insured. Buying your first home brings enough expenses. While you want to have ample coverage to protect your home and belongings from emergencies, you also don’t want to overspend.
Tip #3: Use a Local Independent Insurance Agent to Help You Through the Process
Local insurance agents are likely well versed in the real-estate comings and goings of your area. Your local insurance agent can help you in the following ways:
- Your insurance agent will know the area and what coverages are typically necessary.
- Your insurance agent will also know how to explain the terminology to you in a way that is easy to understand.
- Your insurance agent may have access to previous insurance claims that have been filed on your property through the comprehensive loss underwriting exchange (CLUE), which can affect the premiums for your home insurance.
Another crucial factor in choosing homeowners insurance is getting help from an independent insurance agency. You can find your own homeowners insurance policy, but having an agent help you through the process is sure to lessen the headache. An independent agent is likely to make sure you end up paying for everything you need and not superfluous extras.
Independent insurance agents can help you shop around for the best homeowners insurance quotes, so you do not feel like you have to buy the first one that you find.
As a first-time homebuyer, you’re taking a major leap in your life. A house is a big investment in your future. You have every reason to step gingerly and ensure you are making all the best choices.
In the case of homeowners insurance, using an independent insurance agent gives you the advantage of having an expert alongside you while you make your insurance purchase.
Tip #4: Take Advantage of Potential Insurance Discounts
Some companies offer discounts on their homeowners insurance policies. As a first-time homebuyer, it is easy to miss out on these opportunities if you do not know they exist. Consider taking these steps to potentially decrease your premiums:
- Install home security
- Reinforce your roof
- Modernize your plumbing and electric
- Smart Protective Devices
If your insurance company sees that you are making moves to improve your home’s safety and security, it will consider your home less of a liability. For example, a home security system means your home is less likely to experience theft.
If you reinforce your roof and add storm shutters, your home will become less likely to get severely damaged during a storm. Modern electrics and plumbing mean your home is less likely to suffer from fire or water damage.