Going through the process of purchasing a home can be an arduous task. Getting pre-approved, delivering all the proper documents to your lender, and scheduling inspections can be exhausting. One aspect of the loan process that can be an afterthought but should be given more weight is selecting a homeowners insurance provider. A homeowners insurance policy covers the house’s structure and all its contents should a destructive event occur, such as a fire or storm. A few essential items the buyer should consider before purchasing homeowners insurance.
- Get quotes from at least three companies to compare coverage. Depending on the house you purchase, your belongings, and where you live, your needs will vary, and you need to ensure you get the right coverage at the best rate. Look at reviews and compare pricing.
- Have your lender escrow your insurance payments with your mortgage payments. Your lender will create an escrow account for you to make monthly payments on your behalf for property expenses, such as real estate taxes, and you can also have your homeowners insurance premiums added. This will ensure that your payments are always made on time.
- Only pay for what you need. There are four components of homeowners insurance that all buyers should have:
- Main Dwelling Coverage - This covers the house's main structure in case of a fire or storm damage. You should insure your home for at least 80% of its replacement cost.
- Personal Property Coverage - This covers the owner's personal property, including appliances, furniture, and jewelry. It would help if you did a thorough inventory of your home and set the coverage limit at 50% or more of your primary structure limit.
- Liability Protection - This coverage protects the homeowner in the event of bodily injury or property damage to another person. Most coverage is set at a $100,000 liability limit, but you may choose to go higher.
- Additional Living Expenses - These are the expenses incurred if you need to live outside your home due to repairs required that are also covered by the policy.
- Other Considerations - There are likely exclusions on your policy, and you want to ensure you’re covered for something you may need. Suppose you live in an area prone to flooding. In that case, you may want to consider purchasing additional flood insurance. If you move to a location like California, where earthquakes are more common, you may wish for earthquake insurance. Other possible homeowners’ insurance policy exclusions include destruction by pests and mold, high-value personal item loss, and home-based business liability.
Purchasing homeowners insurance is an integral part of the home-buying process and doing it right should be a priority. Make sure you have the right coverage with the right company at the right price.