Home insurance is all about keeping your home safe but you should also ensure that while seeking this safety, you too are safe. There are things you need to cross check and ensure that they are okay. For instance ensure that the policy you buy covers everything.
Do make sure you’re insured for 100% replacement cost
If there is a mortgage, the bank will insist you have coverage for 100 percent of your home’s replacement cost. If you want your home rebuilt after a major loss—even if there is no mortgage—we highly recommend it. Replacement cost is not the market value of the home—it is the cost to completely rebuild it in the event of a total loss.
To help offset cost overruns, ask for inflation guard. This increases the coverage of the structure by a percentage at each policy renewal. You can also add coverage to make sure your rebuilt home will be built according to current code by adding ordinance/law coverage. With some companies, you can also add replacement cost—plus a percentage—to account for possible cost overruns. Coverage varies greatly from company to company, so work with your agent to make sure that if you do suffer a total loss, your policy will make you as whole as possible.
You should also ensure that you are well aware of the risks that are related to the cover. Do not assume. Ask where you are not sure or else you will get the shock of a lifetime.
Understand the Risk Factors That Your Premium Will Be Based Upon…
It’s important that you realize your premium is based around the risk that the insurance company is taking by selling you the policy. In other words, the higher the risk that something will happen and they’ll have to pay you for damage, the higher the premium will be.
Things like the crime rate in your neighborhood, your living habits, where on the block your home is located, how close you are to highways and busy areas, trees around or near your home…
Everything that you can think of will be assessed and will take part in the factoring of your premium.
Now before you decide on who will be your insurance provider, you will need to do some window shopping of sorts. Contact several insurance firms then interview them. The next thing to do is to escrow your insurance payments together with the mortgage.
- Contact at least three companies to compare coverage. Your mortgage lender can, and probably will, require you to have homeowners insurance. You may be required to purchase additional insurance – like flood insurance. You aren’t required to buy from a particular insurance company. Instead, compare coverage, price and customer reviews. Be sure you get the right type and amount of coverage. Shop for value, not necessarily rock-bottom price. Since you’ll mainly deal with insurance companies during times of disaster, make sure the company you choose has great customer service reviews.
- Escrow your insurance payments with your mortgage payments. If you’re like most homeowners, you’ll tack monthly insurance payments onto your mortgage check. The lender will pay your insurance premiums (usually your property taxes, too) out of your escrow account. Lenders prefer this option because it lets them know your insurance premiums are being paid, and their investment is well protected. Most likely, you’ll need to pay for one year of insurance at closing. Bring information about the insurance policy you have chosen and the money to cover the first year’s premium.