You’re finally buying a house. Hello, adulthood! Also – congratulations on making the decision to own a home. If you’re like most people, your home is your biggest investment. Before you close, you will need (and hopefully want) to have homeowner’s insurance in place. The choices involved in the home insurance process are important steps in your financial plan. You will select a provider, policy, and premium to support your investment and lifestyle. But with so many insurance companies vying for your attention, where do you start?
How To Get Insured
Start by getting quotes. Your Realtor can refer insurance agents to you. Ask your friends and family for referrals. Then, choose 3-4 agents to call. Most agents will be willing to meet over the phone and will ask questions about the subject property and your insurance needs. The agent may also ask personal questions such as your birth date and may request a history of your credit and previous insurance claims.
Questions to Ask Prospective Agents
- How much coverage do I need?
- Should I get flood insurance or other optional coverage?
- Does this policy cover anything besides the house?
- What happens to my premium if I change the deductible?
Policy Riders: Are They Worth It?
Homeowner’s insurance can be customized in many ways. Many riders (also known as endorsements) exist as optional coverage for the benefit of the insured, but the choices can be overwhelming! In the end, the time spent doing your homework and considering the overall value of policy riders will result in more coverage and thus more peace of mind for your household. In some cases, however, the increase in premium might be greater than the benefit received. If the quote for a particular rider comes in higher than you and your agent find useful, consider “self-insuring” for a specific type of event. (Self-insuring means saving an emergency fund for unexpected expenses, such as needing a tow truck.) Ask your agent whether the following riders are an option on your policy and what the additional benefit would do to your premium:
- Hurricane/Other Weather Events
- Roadside Assistance
- Identity Theft Recovery
- Personal Liability
- Water back Up/Sump Pump Failure
- Mold Remediation
- Anything else your agent proposes
Pick The Best Agent and Policy
Once you’ve selected an agent and informed them that you plan to proceed, he or she will issue the paperwork that your loan officer and/or title company has requested. You will also be furnished with a copy of your policy. Read it.
Know That You Can Change Later
It is important to have your policy in place before you close on your new home, but this is a choice you can undo. You will always need insurance for the unexpected, but as a homeowner, you’re free to shop around for a better deal at any time. An experienced agent will be happy to review your policy at your request or at regular intervals. If you’ve made improvements to your home or if your credit score has increased, you may get a better offer from your current insurance company. If you think another insurance provider could better serve you, it may be advisable to seek quotes from other providers in your area months or years down the road. The important thing is to stay insured even after you pay off your home.