Having home insurance isn’t just a benefit. It’s a requirement in many cases across the United States. Purchasing homeowner’s insurance isn’t required by law.
Though, it’s required if you plan on taking out a mortgage for your home. Still, buying home insurance isn’t a complicated task. In fact, it can be simple if you know what you’re doing.
With that said, are you looking to learn how to buy home insurance? In this article, we’ll discuss all the things you need to learn before buying a home insurance policy.
1. Realize That You Need Home Insurance
Before you start buying home insurance, you should never treat insurance as a requirement. Home insurance is designed to protect your best investment, which is your home.
It’s not smart to buy a home and work hard to pay off your mortgage without home insurance. If something happens to your home, like a fire or natural disaster, you’ll be left with nothing without home insurance.
For this reason, you should treat home insurance like a benefit and a privilege. Doing so will allow you to put more effort into finding the right home insurance policy.
You’ll also be less likely to settle for a lackluster home insurance company.
2. Determine How Much Coverage You Need
There is no “right” amount of coverage to purchase. Every home is different. All homeowners have different needs, and insurance companies don’t all offer the same products.
When you decide to buy home insurance, make sure you choose the right amount of coverage to cover your needs. You should remember that the better your coverage is, the less money you’ll pay if a disaster happens.
If you’ve taken out a home mortgage loan, your lender may require you to buy a specific amount of coverage for your home. Lastly, the amount of coverage you buy and the style of your home can affect your rates.
3. Compare Different Deductibles
The deductible is the amount of money you’ll be responsible to pay in an insurance policy. When shopping around for home insurance, you should make sure you’re comfortable paying the deductible.
It’s important to note that a home insurance policy with a $200 deductible will cost more than a policy with a $300 deductible. The goal here is to find a deductible you can afford.
You should also realize how your deductible can affect the total coverage amount of your insurance policy.
4. Choose How You’ll Be Reimbursed
Now, here comes the major part of choosing a home insurance policy. When you buy a home insurance policy, you’ll have to decide how you’ll be reimbursed after a disaster.
Usually, you’ll have two options, which are to get the replacement cost of your damaged home or the actual cash value. The replacement cost refers to the amount of money it’ll take to rebuild your home.
The actual cash value is a monetary amount of what your home is worth. You should always insure your home for at least 80 percent of its replacement value.
This will make sure that your home is mostly covered during an emergency.
5. Shop Around First
This is arguably the most important step of buying home insurance. You’re not required to buy from the insurance company your lender recommends.
You also don’t have to purchase from the first few insurance companies you meet. Instead, create a shortlist of ten different insurance companies.
Make sure to jot down their rates, as well as any pros and cons they may have. Shopping around will give you the freedom to make a choice you’re comfortable with.
Besides, highly informed buyers always make the best purchasing decisions.
6. Ask About Discounts
There are many ways you can save on home insurance. One way is by asking an insurance agent for discounts on your policy. Some ways you can receive a discount can be if you’re a military veteran or first responder.
You can also save money by bundling your home insurance with auto insurance as well. Finally, if you improve the security and safety of your home, you could take advantage of cheaper rates.
For example, you could receive lower rates by installing a home alarm system. You can also lower your insurance rates by replacing your roof.
7. Learn What Your Policy Covers
It doesn’t matter whether you rent or own a home. There are so many different insurance policies to protect your home and belongings. Each insurance policy covers different types of disasters and events.
Three common disasters that are covered by home insurance are theft, windstorm, and fire. As you can see, you may need to purchase more coverage if you live in specific regions of the country.
For example, if you live in California, you may be interested in buying home insurance that protects against earthquakes. This is because earthquakes are more common in that region than anywhere else.
8. Hire An Insurance Broker
There is a major difference between an insurance agent and a broker. An insurance agent is an individual that works for a particular company. They are required to sell their company’s products, even if they’re not the best for you.
An insurance broker, on the other hand, is an independent professional that only gets paid when you choose an insurance company. Insurance brokers are more likely to give you a better deal.
They are tied to any particular company and their job is to give you a list of options so you can check it out.
9. Read Your Policy
Your home insurance policy is a legal contract. Once you sign, it’ll go into effect immediately. When this happens, it’ll be difficult to file a dispute with your insurance provider.
Because of this, you should read over your policy carefully. Make sure you read your rights and the responsibilities of your insurance provider. If you have any questions, be sure to ask your insurance agent for help.
It’s better to ask your questions before you sign instead of running into any surprises later. You would be surprised by how many people ignore the details of their policy.
10. Check Your Policy Every Year
Your home may change every year. You may want to add a new addition to your home? You may also hire a professional to add insulation to your attic or a new roof to your home.
Adding these improvements to your home can increase its value. This makes it necessary to update your insurance policy and increase its replacement cost.
If you don’t check your policy, years can go by without you noticing. Soon, if a disaster happens, you won’t be able to collect the full replacement value of your home.
11. Get The Facts About Your Home
Before buying home insurance, you should learn as much as you can about your home. The age of your plumbing and electrical systems can affect your premiums.
The construction materials used to build your home can influence your insurance rates as well. For example, masonry homes may provide a price break since they’re not as flammable as other homes.
Though, masonry homes are susceptible to earthquake damage. If you live in an area where earthquakes are common, your premiums can increase.
With that said, make sure you have as much information about your home before buying home insurance.
12. Beware Of Where You Live
The materials used to build your home isn’t the only factor that can affect your premiums. Your home’s location can influence the availability of your coverage and premiums.
Homeowners that live in areas with rough climates are going to pay more in home insurance costs. In fact, homeowners living in Florida, Louisiana, and Texas pay the most for home insurance.
It’s also important to note that your insurance premiums can be cheaper if you live next to a fire department. Insurance companies won’t skip your home’s location when factoring in your insurance costs.
13. You Need To Protect Yourself
Your home insurance policy can only go so far in covering your home. As a homeowner, you’ll need to protect your financial assets on your own.
Let’s say that someone visits your home and falls down the stairs. All of a sudden, that person can sue you for their lost wages and medical bills.
Your homeowner’s insurance may cover some of this liability, but that depends on how severe the liability is. If you have stairs or other hazards in your home, make sure you purchase the best liability insurance.
14. Perform Preventative Maintenance
If you are constantly filing insurance claims for home repairs, you could watch as your premiums rise. Too many claims can jeopardize your ability to have home insurance.
Because of this, you should take the proactive approach in making home repairs before they become necessary.
15. Find The Right Company
Not all insurance companies are the same. Before making the decision to partner with an insurance company, make sure to check their online reviews.
Online reviews are great for learning about the experiences of current and previous clients.
Learn How To Buy Home Insurance
As you can see, it’s not difficult to learn how to buy home insurance. Make sure you keep all of this information in mind before buying a home insurance policy.
Do you want to learn more about home insurance? If so, check out more of our helpful articles on the subject.
Table of Content
- 1 1. Realize That You Need Home Insurance
- 2 2. Determine How Much Coverage You Need
- 3 3. Compare Different Deductibles
- 4 4. Choose How You’ll Be Reimbursed
- 5 5. Shop Around First
- 6 6. Ask About Discounts
- 7 7. Learn What Your Policy Covers
- 8 8. Hire An Insurance Broker
- 9 9. Read Your Policy
- 10 10. Check Your Policy Every Year
- 11 11. Get The Facts About Your Home
- 12 12. Beware Of Where You Live
- 13 13. You Need To Protect Yourself
- 14 14. Perform Preventative Maintenance
- 15 15. Find The Right Company
- 16 Learn How To Buy Home Insurance