Are you buying a home for the first time? A home is a serious investment, and if you’re a first-time buyer, the cost and commitment can become overwhelming. From choosing the right community to deciding how many bedrooms you need, there’s a lot to factor in.
But aside from the basics, you shouldn’t forget to buy a homeowners insurance policy. Homeowners insurance protects you against losses or damage to your property and possessions. However, with countless insurance companies to choose from, the task of selecting the “best” insurance policy can be a challenge.
If you’re a first-time homebuyer and you don’t know where to start, keep reading. In this article, we’ll go over several home insurance tips you need to keep in mind.
What is homeowners insurance?
A standard homeowners insurance policy covers the costs to repair or replace your property and possessions in the event that they are damaged or lost in a covered peril, such as a fire, flood, or burglary. It also provides liability coverage for accidents that happen within the home.
It’s important to note that homeowners insurance covers owner-occupied homes. Hence, a property owner who plans to rent out their home may need landlord insurance depending on the length of the lease.
Why do you need homeowners insurance?
If you’re planning on taking out a mortgage, your lender will likely require you to buy homeowners insurance. This is because your mortgage company wants to protect itself in the event that your property is destroyed.
Aside from being a requirement, homeowners insurance protects your physical structure (the home) and personal possessions from perils such as fires, tornadoes, theft, vandalism, and much more. Here’s what a standard homeowners insurance policy covers:
- If your home is damaged by any of the covered perils, your home insurance policy will be able to cover the costs of rebuilding or repairing the structure.
- Personal belongings. Personal belongings include electronics, appliances, furniture, and other items that are inside the home. If these are damaged or lost in a fire, burglary, etc., you’ll be able to repair or replace them with your home insurance policy.
- In the event that you or your household members accidentally injure or damage someone else’s property, you’ll be glad to have homeowners insurance. For instance, if your child hit’s the neighbor’s window with a baseball, your insurance policy will pay for repairs.
- Additional living expenses. This coverage pays for hotel bills, pet boarding, laundry services, and other costs in the event that your residence becomes inhabitable due to covered perils such as fires and tornadoes.
How do you choose the right insurance policy?
As a first-time homeowner, you’ll want to choose the insurance policy that suits your specific needs. Here are our tips on choosing the right homeowners insurance policy:
#1 Shop Around
Don’t go for the first insurance company that you find. As soon as you’ve closed the deal on your property, start looking for at least three insurers. If you don’t know where to look, consider asking a property manager.
To make sure you don’t end up with an insurance company that doesn’t take your claims seriously, you may want to read reviews from real customers.
#2 Determine How Much Coverage You Need
You don’t want to over-insure or under-insure your home. It’s crucial to determine the right amount of coverage that you actually need — this can be calculated by figuring out how much it would cost to rebuild your property from the ground up.
Hire a property management company to help you calculate your home’s coverage needs. Don’t forget to ask your insurance company for their estimate, as they may have a different formula.
#3 Identify the Exclusions
A standard homeowners insurance policy won’t cover certain perils. This typically includes natural disasters such as floods and earthquakes. This is especially true in areas that are flood-prone such as Miami-Dade and Broward.
If there are any exclusions that you’d like to be included in your insurance policy, you will have to purchase additional coverage. For instance, if you live in California, you may want to purchase earthquake insurance.
#4 Consider Your Deductible
The deductible is the amount you need to pay out-of-pocket whenever you file an insurance claim. Depending on the insurance company, this can be a fixed-dollar amount or a percentage of your coverage. Be sure to ask the insurer about their policies regarding deductibles.
Deductibles range from $500 to $1,000, however, you can increase your deductible in order to lower your premium rates. If possible, go up to $2,500 or $5,000 — just be sure that you have enough savings to cover the deductible if you ever file a claim.
How can you lower your home insurance premiums?
Buying a home is a big investment so, understandably, you want the cheapest insurance policy. On average, homeowners insurance costs $1,312 a year which is about $109 a month. Once you’ve signed up for a homeowners insurance policy, you can lower your insurance premiums by doing the following:
- Make your home disaster-resistant by installing storm shutters, burglar alarms, smoke detectors, carbon monoxide detectors, and so on.
- Maintain a high credit score (ideally above 740).
- Upgrade to energy-efficient appliances to take advantage of environmental discounts.
- Consider getting rid of “dangerous” features such as swimming pools, trampolines, and the like.
Do you need homeowners insurance if you’re buying a condo?
If you’re buying a condominium unit, you’ll need a condo insurance policy. A condo insurance policy covers the interior of the unit, including walls, appliances, personal belongings, and so on. It also provides liability coverage in the event that someone in the unit gets injured, or when the condo owner accidentally damages someone else’s property.
There’s no such thing as the “best” homeowners insurance policy, as each home has its unique needs. As a first-time buyer, all you need to do to ensure that you’re buying the right insurance policy for your home is to be informed. Know everything there is to know about your insurance policy.
Hiring a property management company like Luxury Property Care can help you determine the amount of coverage that your home needs. By partnering with us, we can leverage our long-standing relationships with some of the top companies in the U.S. to negotiate the best rates on your behalf.