October 12, 2012
Five Homeowners Insurance Tips for First Time Buyers
A first time homeowner can find buying a new home exciting and overwhelming. When shopping for quotes, there are five areas that are especially important. Here are tips to get the best coverage at the most affordable price.
1. Know the difference between the replacement cost and the market value. Depending on how much was originally paid for the property, the cost of rebuilding can be higher or lower than the market value. Rebuilding a home is usually cheaper than buying an existing structure unless the original property bought was a foreclosure in which case rebuilding might be more expensive. The key is to accurately determine the cost of rebuilding when finalizing the details on a homeowners insurance policy.
2. Take a home inventory and determine the proper amount of personal property protection. Generally, policies cover 50-75 percent of the replacement value of the house. However, this may not be enough to cover certain valuables such as jewelry, fine art, collections, electronics and other expensive items. A separate rider may be needed and this should be discussed with an agent.
3. Have enough liability protection. This protects a homeowner if they are sued for an injury that takes place on their property. Many policies will even cover a policyholder if an incident happened away from the house. Depending on their assets, some may want to consider an additional umbrella policy if they are worried about ever being sued for an amount in excess of what their coverage offers.
4. Know what is not covered. Carefully study the exclusions section of the homeowners insurance policy. This is important to be aware of so additional coverage can be purchased. For instance, if one lives in an area prone to flooding, they may need to buy additional flood protection.
5. Consider additionally living expenses if ever forced from the dwelling. If a house becomes unlivable due to a flood, earthquake, fire or other disasters, a family will need to pay for living accommodations, may need additional money for food and transportation, and other expenses. This coverage is “additional living expenses” (ALE) and is a benefit that is usually worth about 20 percent of the home’s replacement value. Be aware of the benefits, limitations and exclusion.
When shopping for home insurance quotes, be sure to find a company that is financially stable and has a high customer satisfaction rating. Two resources to check these qualities are A.M. Best for financial strength ratings and J.D. Power and Associates for their annual customer service rankings.