Buying a home is one of the biggest financial investments most people make and it’s only important to protect it. A homeowners insurance policy is designed to protect homeowners with financial compensation should the house suffer any damage or any house related losses.
For first time home buyers, shopping for homeowners insurance is one of those things that sometimes get overlooked. It’s a good idea to start shopping for homeowners insurance as soon as your offer is accepted. Most of the time, your lender will require you to purchase homeowners insurance as a condition of getting a mortgage so save yourself the trouble of last minute calls to insurance agents. You can save money and time if you do your homeowners insurance shopping early.
Tips when buying homeowners insurance
- Shop around before you buy homeowners insurance. You can get quotes online. It is important when shopping for home insurance to not only find great price, but to also find top notch coverage and great customer service reviews.
- Sometimes the lender gives you the option to include homeowners insurance payments with your loan payments. The lender will pay your insurance premiums out of your escrow account. Most likely you will pay for one year insurance at closing.
- There are different kinds of policies:
The HO-2, HO-3, and HO-5 are policies for owners of fairly modern homes, from the least coverage of the HO-2 policy to the most comprehensive policy of HO-5. These 3 policies also cover other physical structures on the property and personal property for the same covered perils for the main residence. HO-6 is specially designed for owners of condominiums/co-ops, HO-7 is similar to HO-3 but for mobile homes, HO-8 policy is for older homes whose replacement cost far exceeds the property’s market value.
HO-3 is the most commonly purchased policy, which is an open perils policy that covers any direct damage to the house or other structures on the property unless it is specifically excluded.
- Decide how much coverage to get. The home’s insurance value is based
on the cost to rebuild the house not the home’s market value. Go for the more comprehensive option that can cover 100 percent of the cost to rebuild your home. Make sure that your homeowners policy has enough coverage for all of your financial assets like your home and personal property. - To get the best rate for your policy the agent will need information from you such as when was the house built? What’s the square footage? Where is the home located? Make sure you have this information handy.
- You’ll also need to choose the deductible amount. A deductible is how much you agree to pay out of your pocket for losses before your insurance company begins to pay. You can save money on your premiums by having a higher deductible on your policy but you have to check with your lender before opting for a higher deductible. Many mortgage companies will not allow you to exceed a $1,000 deductible.
- Ask about available discounts to help lower your homeowners insurance premiums. Here are some of the policy discounts available in South Carolina: up to 15% discount if your home has burglar alarm installed; 55 and retired discount for senior homeowners; up to 20% discount if you insure your car/home with the same company; fire safety discount for homes with smoke detector, fire extinguisher or sprinkler system; and new home discount for newer homes. Percentage discounts vary among insurance companies, so it’s best to shop around.
- Understand the details of your policy to ensure you have adequate coverage and to know your coverage limits.
READ MORE:
HOME BUYING 101: WHAT IS A PRE-APPROVAL? DO YOU NEED IT?
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