As a first time homebuyer there are so many items to check off the list and many of them are unfamiliar including insurance. Here are some tips to assist with your homeowner’s insurance.
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Everyone wants to get the best price, but don’t just pick the insurance company that offers you the lowest homeowner’s rate. Most insurance companies offer significant discounts for carrying multiple lines (auto, home, etcetera). With that said, it is best to compare the overall price for your combined annual insurance premiums. A company may be much higher on the autos and less on the home and vice versa. If you compare the total price for the insurance “package”, you will end up saving money.
When insuring a home, the insurance companies have to insure the home for what it would cost to rebuild/replace the home. This is why the value that the home is insured for may not be the same as the purchase price of the home. Insurance agents are required to do a reconstruction estimate of the property based on the characteristics and features of the home.
The homeowner’s policy is a package policy and includes a number of different coverages that are automatically included with the policy and then other features that you can add (endorse). Once the property value is determined, then the other coverages are a certain percentage of the value of the house (other structures, personal property, loss of use, liability and medical payments). Changing or lowering any of these coverages will not effect the base rate of the policy as it is already priced at that percentage. In terms of the liability coverage, as a homeowner you will want to have that be a minimum of $300,000 as you will be owning a home and want to make sure that you are protecting that investment.
Endorsements are the “extras” that you can add to the policy. One that should be added to every policy is the “Backup of Sewer & Drain”. The amount of coverage you choose for that will depend on if your basement is finished or not. This is very important coverage here in Iowa as we have had tremendous storms that cause temporary flooding and water backups into people’s basements, etc. This coverage will provide protection in the event water comes up through the floor drains, sewer lines. FYI – Homeowner’s policies do NOT every offer coverage for flooding. Only the government offers flood insurance.
Jewelry & Scheduled Articles
The homeowner’s policy does cover jewelry but for the same things the home is insured for (fire, tornadoes, etcetera). There is a limit on how much coverage there is for jewelry (and other areas as well- guns, money on premises, etc). Wedding rings and other higher value jewelry is best insured as a scheduled item. It is not expensive and gives broader coverage and a lower deductible. Depending on the insurance company, jewelry is either scheduled as an endorsement or written as an inland marine policy. People also schedule golf carts, golf equipment, bicycles, artwork and other valuable items. Make sure to ask about this.
As a first time homebuyer, you may not be aware of all of the discounts that are available to you. The multi-line discount was mentioned earlier (carrying your auto insurance with the same company as the home). There are other discounts that are available too. This will vary from company to company, but it is good to be aware of. Here are some common ones: New home discount, home improvement discounts (if the roof, electrical or plumbing have been replaced in the past 5 years), protective devices discounts (fire/smoke alarms, burglar alarms, security systems, etcetera).
The escrow account is setup to pay for the annual homeowner’s insurance premium and the property taxes for the home. Part of the closing costs include the first year’s payment for these items and then during your first year of payments, the escrow account is gradually collecting the money in the account to pay for next year’s insurance renewal and property taxes. Many people think that once escrow is set up, that they can’t switch insurance companies. This is not the case! Mortgage
companies and Insurance companies handle changes to escrow accounts daily and are accustomed to it. Your insurance agent can help guide you whenever you choose to make changes.
It is important to sit down with your insurance agent periodically (at least every other year) to do an insurance review. Insurance laws and insurance policies change frequently. Your agent can talk to you about these changes and options as there are ways to do more with your insurance dollar and protecting your family. It is also good to re-evaluate the reconstruction estimate of the home too as people remodel and make changes or additions. Too many people think that the agent is asking them to come in to “sell” them something. This is not the case. As an insurance agent, they are responsible for making sure their clients are protected properly. This protects the client as well as the agent – a win win! Make sure to have those reviews!
Make sure you have your insurance agent’s contact information at your home as well as the claims number for the insurance company. It is always best to contact the agent in the case of a claim so that they can guide you as to what needs to take place and also let you know what to expect. Claims service is the biggest part of why you buy insurance! Let your agent be there to help you through it.
Congratulations on your new home!