The process of purchasing homeowners insurance may appear complicated, but it’s pretty simple. If you’re a first-time home buyer, read our guide below for advice on obtaining homeowners insurance. This will give you enough information to assess your coverage requirements and compare quotes from various companies.
Tip 1: Purchase Homeowners Insurance Well Ahead of Your Closing Date
It’s best to start searching at least 30 days before closing a home loan. Allowing yourself a few extra weeks to shop around for coverage not only ensures you will get your closing date but also allows you to evaluate and determine your coverage needs. Preparing your policy ahead of time can also result in a substantial policy discount.
Tip 2: Insure the Home for Its Replacement Cost Rather than Its Market Value
If you base the amount of your homeowner’s insurance on the value of your mortgage or the market value of your home, you will either over- or under-insure your home. What you’re looking for is the amount it would cost to rebuild the home at today’s labor and construction costs. The replacement cost of a home is often less than its market value. Your homeowners insurance company will provide you with a cost estimate, but you can also calculate it to ensure you have enough coverage.
Tip 3: If You Own a Car, Consider Combining Your Home and Auto Insurance Policies
Bundling makes it simple to shop for insurance, gives you the convenience of only having to remember to log into one account, and regularly yields sizable discounts. Consider any other types of property insurance you already have or are interested in when shopping for home insurance. Think about consolidating your insurance with one provider to maximize your savings.
Tip 4: Figure out How Much You’re Willing to Pay out Of Pocket versus Using Your Homeowners Insurance
Setting a policy deductible is necessary when finalizing the details of your home insurance policy. A higher policy deductible can reduce your homeowners insurance premiums, but it also means you’ll pay more if you need to file a claim. When deciding on your deductible, consider how much you’re willing to pay out of pocket.
Tip 5: Think About how Much Liability Insurance You Need
If you cause someone else’s injury or property damage, your homeowners insurance’s liability coverage will cover medical or legal costs. In a costly lawsuit, having enough liability coverage to protect your assets — your home, car, and retirement savings is critical. Unlike dwelling coverage, which covers your home if damaged, the liability coverage you have doesn’t always increase your home insurance costs.
