When buying a new home, there are many things to consider, such as the area you want to live and how close it is to places such as hospitals and schools. You also want to make sure your home is big enough to suit your family and affordable so that you have extra income beyond your mortgage and other bills.
One important aspect that some homeowners overlook, however, is home insurance.
If you are searching for a home, you will generally be required by most lenders to carry home insurance to cover the cost of your mortgage. This is so the lender has protection in case something happens to the home. However, not all home insurance policies are created equal.
Coverage under home insurance can vary depending on your insurer and their offerings. This is why it is important to shop around between multiple insurers or find an independent agency that can do the shopping for you.
Before you start shopping for home insurance, check your credit rating. Your credit rating can raise or lower your interest rate depending on if it’s good or bad. In general, you want to have a 750 or higher for very good credit. If you have less than 600, it’s going to be harder to find a cheap home insurance rate. You can work to improve your credit through paying bills and investing in a credit card.
What Does Home Insurance Cover?
In general, a basic homeowner’s insurance policy covers:
- Dwelling: Dwelling coverage helps pay for repairs or a rebuild when the dwelling (home) is damaged by one or more listed perils. Covered perils include fire, hail and tornadoes.
- General liability: General liability steps in when bodily injury or property damage occurs to another person while on your property.
- Pet liability: Pet liability steps in if your pet causes bodily injury or property damage to another person.
- Other structures protection: Dwelling coverage only pays for repairs on your home and its attached structures. Structures such as detached garages and fences are covered beneath other structures protection.
- Additional living expenses (ALE): ALE helps pay for living expenses if you must live somewhere else while the house is under repair.
An additional coverage you may want to consider us a personal property endorsement/floater. Some belongings aren’t covered under your typical homeowners’ insurance. Expensive items like jewelry may not have coverage under your policy. A personal property endorsement or floater helps pay for expensive or rare items that are lost or damaged due to a peril.
What Does Home Insurance Not Cover?
Homeowners insurance typically doesn’t cover flooding. You can purchase a separate flood policy if your area is prone to a lot of rain or floods to protect your home from possible damages. Earthquake damage is also usually excluded. Speak to an insurance agent about adding additional coverage to your policy.
Understanding Home Insurance Premiums
There are many factors that affect your home insurance premiums. Factors that may cause your home insurance premiums to be higher (besides the general market) include:
- Living close to a coastline. Weather damage is more likely closer to the coastline, which usually costs more to insure. You may also have to purchase a hurricane or windstorm deductible.
- Moving into an older home. Older homes can cost a lot to insure since they often require costly repairs and can be seen as less safe if they haven’t been maintained.
- General condition and construction. A home with a roof that isn’t fire or hail resistant may cost more than homes with roofs that are. The construction also matters. If the foundation is weak, you’ll have to bring your home up to code and it may cost more to insure.
- Swimming pools. Structures like swimming pools typically require more liability insurance since it’s an additional risk of injury.
Be sure to have the new home inspected thoroughly for any possible areas of concern and check the loss history report to see any claims that were made in the past.
Choosing Your Home Insurance deductible
Your home insurance deductible is how much you must pay out of pocket after a claim. For example, say a storm causes $2,000 in damage to your home and your deductible is $500. This means you must pay $500 toward repairs before receiving compensation for the remaining $1,500. You can raise or lower your deductible depending on your needs. A higher deductible can save you money by lowering your monthly premiums, but it also means paying more out of pocket after an accident.
If you aren’t sure where to set your home insurance deductible, be sure to ask an insurance agent about your deductible options. Choosing the right home insurance policy is crucial for protecting your new home and everything in it, so ask questions and shop around to find the best coverage.