No matter what stage of the home buying process you’re at, one all-important aspect you must not forget is home insurance. By the time you’ve moved in, you should be well versed in homeowners insurance policy lingo.
Like all other types of insurance, one size never fits all, so it’s in your best interest to shop around for the one that best suits your situation. Your home insurance premium will change depending on the location of your house, how old it is, the level of coverage and how big the deductible is.
As always, if you don’t know where to start, take heart–we’re here to help. Below is a list of 6 things you absolutely need to consider in order to choose the best policy for you and your wallet.
- Location, location, location
As the age old saying goes, location is everything; alongside the condition of the house, how big it is, how it was constructed, etc. All these massively affect both the price and type of insurance policy you can get.
Unlike most home buyers, insurers don’t care so much about how close your house is to good schools, or a trendy retail strip. They do however, care about how close your house is to a great fire house for example, as that means the house is safer in the event of a fire and will therefore cost less to insure.
Another important factor is how close the house is to the coast. That beachfront home will unfortunately cost you quite a bit when it comes to insurance. VP of communications for the Insurance Information Institute, Loretta Worters, says that homes near the coastline will have high insurance costs because of the increased risk of weather events that can lead to claims.
In addition to an already high policy cost, coastal home insurance might include a hurricane, or storm deductible depending on how much it would cost to rebuild the home.
- Got a pool? Swim right into extra coverage
So your dream home has a stunning infinity pool complete with hot tub. Amazing! I’m sure your friends can’t wait to visit–but you might want to get yourself some additional liability coverage before they do.
Liability insurance will protect you and pay off any expenses in the event that any accident or injury occurs in your pool. Another way to go about this to to get a general umbrella liability policy that provides a level of coverage you usually cannot get with a standard home insurance package.
- It might be a good idea to get flood insurance–even if you don’t live in a flood-prone area
Flood damage is usually not covered by standard home insurance policies. If you are buying a house in a flood-prone area, you will need to get separate flood insurance coverage. This can be purchased through the government’s National Flood Insurance Program and a few specialty insurance companies.
Live far from a flood zone? You might not be totally in the clear. It’s worth some checking to see if you might benefit. Just because you don’t live in a “flood-zone” doesn’t mean it couldn’t happen. (With some exceptions of course) Your premiums would be much lower because you don’t live in a high-risk area, so at least do your due diligence.
Why get covered for floods if you’re not likely to experience one you ask? Worters reports that nearly“90% of all natural disasters in the US involve flooding”. What’s more shocking is that 25-30% of all paid claims for flooding aren’t in areas that have been deemed flood hazard zones. With this one, it’s better to be safe than sorry.
- Ditto for earthquake insurance
If you live outside of California, you might not see the point of having earthquake insurance. In reality, up to 39 states have experienced tremors of different sizes according to reports from the Insurance Information Institute. As with floods, earthquakes typically aren’t covered in standard insurance packages.
You will need to get a separate earthquake insurance package to cover any damage in the event that one occurs. The cost of this will change depending on your location, the size and type of construction of your house as well as how old it is.
- A high deductible isn’t all bad
You will want to do quite a bit of research to find the best policy for you. Look through the extent of the coverage, rates and deductibles of at least three insurers before you settle on one.
Bonus tip: Pay extra close attention to how big your deductible is.
Many insurance professionals will advise that you choose the highest deductible within your budget because most people will only make a claim once every 10 years. A higher deductible will cause you to only file a claim when you need it and save you money year after year.
- The claim history of your house is important–even from before you moved in
We often advise homebuyers to get as much information from agents as they can. One thing you definitely want to know is the claim history of your house–and how it might then affect your own insurance premiums. If you moved in without knowing, no worries! It’s never too late to find out.
The great news is that all of this information is stored in a database called the CLUE (Comprehensive Loss Underwriting Exchange). It functions like a credit report–but for your house–and will include several records on all the claims that have been filed from that address.
Any claims that have made in the last five years can hike up your rates, even if you weren’t living in the home at the time the claim was made. But fear not, home owner–not all previous claims will hurt you.
Some recent claims can actually benefit you. For example, an old, leaky roof that was replaced after a windstorm can make the house look safer in the eyes of an insurer.
If you want access to your home’s CLUE report, be sure to ask the seller (they are the only ones that can access it). Not all sellers will actually hand over the CLUE report, but you won’t know until you try. If you’ve already bought the home, the report can be accessed for free through this LexisNexis database.