YOU WILL NEED HOMEOWNERS INSURANCE!
Updated: June 5, 2018
As a potential new
homeowner, remember that Homeowner’s Insurance will be required before your
loan request can be finalized. Commonly known as fire and liability insurance,
you are encouraged to “shop” for your insurance coverage immediately upon
finalizing your purchase contract.
Home insurance has become
more difficult to acquire. The insurance industry now uses what they call
the “clue system” to determine both the owner’s and the property’s ability to
qualify for insurance coverage. This Clue system apparently tracks
whether you, the borrower, has ever filed an insurance
claim as well as whether the property itself has ever had a claim filed on its
behalf. Insurers use this information to sometimes increase the premium amount
or, in some cases, to deny coverage. So, it is important to arrange your
insurance coverage early in your transaction process.
Here are a few things to consider
as you shop for and/or compare insurance plans:
You might start your shopping with the insurance company
with whom you have your auto(s) insured, renters insurance, etc. There
might be a savings when including homeowners insurance
coverage as a part of an umbrella like policy. Make sure you know what the cost
is for just the home coverage so that you might, if you wish,
compare the cost with other companies.
There is often the question of whether you should include
earthquake coverage. This can be pricey. This is clearly a personal
“comfort zone” decision for every home owner. Check the deductible amount
(typically fairly high) and discuss this with your insurance representative.
Flood insurance will be required only if the property is
located in a flood zone. Flood insurance can be expensive. If you
purchase property in a flood zone, avoid surprises and determine the cost of
flood insurance early in the transaction process.
You are seeking “replacement value” coverage. This
means that you are required to only have sufficient insurance to replace the
improved/structural portion of your property.
Discuss the “deductible” portion of your policy.
Insurance carriers are warning that if owners make an
insurance claim it is likely that the annual premium cost will
increase. In some situations, after filing a
claim, the insurance coverage may be terminated when it is next up for renewal.
The lower the deductible the higher the insurance premium.
Thus, it might make sense to acquire a higher deductible amount as you may be
unlikely to make claims for smaller losses. For your information, many lenders
allow a maximum of $1000 deductible. If you own other property, this may be a
good time to review the deductible coverage on all your policies.
In some cases, the insurance company may need to
physically inspect the property. You may want to attend this inspection visit
so that you will know the decisions upon which your premium cost is based.
See ‘Homeowner’s Insurance .. . A Few Details” in this tip sheet section
Word/HAR Webpage/Need Insurance