Don’t get overwhelmed when shopping for homeowner’s insurance.
Selecting homeowners insurance coverage might get a little confusing, particularly if you’re buying your first home. To get you pointed in the right direction, you’ll want to keep the following things in mind.
1. Escrow your insurance payments with your lender
Most lenders want you to escrow your insurance payments with them. That operates to assure that their interests in the property are protected. Premium notices are forwarded to the lender, and it makes payment directly from your insurance escrow account. Assuming you’re buying your first home, the lender will want you to bring proof of one year of homeowners coverage with you to closing. Don’t forget to include your lender in the mortgagee’s clause. Any other homeowners insurance premiums will be packed into your monthly mortgage payment.
2. Get appropriate coverage
Unless you ask for something better, your policy is only going to cover the actual cash value of your home and personal property. You might be paying $250,000 for your home, but its value might fall to $175,000. That’s all your insurer will pay if it burns to the ground. Think about coverage that will replace the home with similar workmanship and materials if there’s a covered total loss. If you’re worried about flooding or earthquakes, get specific coverage. You might want to have particularly valuable personal property like artwork, electronics or musical instruments covered by special endorsements for their replacement cost or their agreed upon value.
3. What’s the home’s claims history
Sellers aren’t required to give you the specific claims history of their home, but most states require them to give you certified disclosures as to the condition of the home and any past structural or habitability issues. You can make your own inferences from that disclosure form. Any structural or habitability issues may have been remedied through a homeowners insurance claim.
4. Sit down with your agent every year
On occasion, you’ll receive policy amendments from your insurer that change terms and conditions of your coverage. If you don’t understand them, don’t hesitate to ask your agent what they’re about when you receive them. You’ll also want to check with your agent annually for a homeowners insurance coverage evaluation. Remember that if you’ve made any significant improvements to your home, its value is going to be enhanced. Get those improvements covered right away.