Home Insurance Guide for First Time Home Owners
What is Homeowners insurance?
Homeowners insurance protects your home and the contents in case of fire or damage, up to the full replacement cost to build a new home and buy new belongings. Homeowners insurance also is important as it protects your personal liability as well. This is liability insurance for accidents and unforeseen events that occur on your property or for the actions of you or your family away from your house. Personal liability can protect you from things like someone getting hurt on your property or defending you in cases of libel or slander or if your pet hurts someone.
You may think that no friends or family would take you to court over an accident, but they don’t have to – their insurance companies will.
To a certain degree, you can think of homeowners insurance like mortgage insurance, for new home buyers. Your insurance can protect the loan you have with the bank. If something happens to your home you would owe the bank and without insurance, the cost would be out of pocket.
What’s the first step when shopping for homeowners insurance?
Calling an independent agent is a great first step. They have the experience and information available to you and can answer any questions you have.
You also have to already have a house chosen to get quoted, not just approval for a home loan. With an independent agent, you can get a variety of quotes from different companies through your agent, rather than shopping around multiple companies yourself.
If you are building or renovating a home, you would need a different type of home insurance – builder’s risk. Builder’s risk policies typically cover the physical building while it is going up, including materials as they become part of the home. You need to get this policy in place before any work starts on the home.
What does homeowners insurance cover?
Homeowner’s insurance policies vary – not all policies are created equal – but they typically cover:
- Replacement cost of your home
- This is not the appraised value, but rather the cost to rebuild it
- Liability insurance
- Water backup for drains and sewers
- Physical damage to your home and personal property
- Other structures such as sheds, barns, garages, etc
- Wind, fire, animal damage
- Loss of use – this covers a hotel or somewhere for you to stay while repairs are being made or the home is rebuilt
- Service lines like sewer and water
- This protects you if a service line coming into your house bursts. Many people don’t realize based on local ordinances they are responsible for any line connected to their home
What does homeowners insurance not cover?
Once again, not all policies are created equal – but they typically will not cover:
- Flood, specifically water coming from the ground
- The only way to cover a flood is a specific flood policy
- Mold & dry rot
- This is very important for new home buyer’s – make sure you get a good inspection
- Valuable belongings such as guns, jewelry, furs, silverware, art, collectibles
- Policies will limit the amount they will pay if the items are stolen
- If you want full coverage, you can schedule anything from jewelry to smart phones specifically on your policy
- Some sudden or accidental damage may be covered, depending on the circumstances
- If there are conditions that exist for a long time – buckling, cracks, etc, it can be considered negligence if you don’t take care of it
In general, insurance is not for maintenance & upkeep of your property and belongings, it is there to protect you in case something unforeseen or catastrophic occurs.
How much homeowners insurance do you need?
The most important thing to be sure with any homeowners insurance policy is that you have enough insurance to rebuild your house. A good insurance agent will ask you questions about the style, finishes and size of your house to make sure the proper replacement cost amount is chosen. It is important to note, this is not your appraisal value – that is the market value of the home. This replacement amount takes into account the actual structure, the materials, your roof, interior square footage, how many bedrooms and bathrooms, what kinds of fixtures, do you have a finished basement, do you have a custom kitchen, and consider the market value (appraisal) vs the replacement cost (to build a new house). The replacement value is included in appraisals oftentimes.
After setting a replacement cost value for your home, your insurance policy will automatically assign a value of 30% of that number to be used to cover all your personal belongings in your home. You can increase this number if you need based on what you own.
There will also be a smaller limit for any outside structures, such as a shed. If you have more outbuildings on your property, be sure to let your insurance agent know so they can increase the coverage for any additional structures you may have.
Another great tip is to be sure to take videos of what you have in your house and keep receipts from expensive purchases. If you do have a loss, providing a video or other proof of what you owned will help make sure you get the true amount back for what you owned.
How do you compare home insurance companies?
You should look at their claims rating, and how they are rated overall as a company. The best rating companies to review are AM Best or JD Power & Associates. Another advantage of going with an independent broker or agent is that they can help compare and contrast these companies and have experience working with multiple companies.
What are ways to save on home insurance?
Buy a house closer to safety services or in a high safety area. Urban, suburban, and rural homes have different rates based on how quickly a fire department can reach you.
Pools, trampolines, certain dog breeds and other factors can affect your rates. Older homes, old wiring or roofing will make insurance more expensive. Use smoke detectors, alarms, and security systems. Not being a smoker will also help lower rates, if you need another reason to stop smoking.
A popular option is bundling your home and auto, which will get you discounts. Of course, independent agents like the team at Doyle & Ogden can help you bundle these policies together and find more ways to save or make sure you get the coverage you need. Get in contact with us today!