Tips on Buying Homeowners Insurance
Hi Taylor - My husband and I are deep into the process of buying our first home and we’re looking into the insurance part of it. I find the whole thing pretty daunting and was wondering if you have any tips. – Eileen
Hey Eileen - Congratulations on the new house! Purchasing a house is a huge decision and unfortunately it isn't as cut and dry as we all wish it could be. Insurance is one of those things that makes the process difficult and detracts from some of the fun, but it’s a necessary evil. Here are a few things to think about that will hopefully help you along and make sure you’re well covered.
1.Compare deductibles. In the early going, when you’re looking between different possible insurers, comparing deductibles can help narrow the field. Higher deductibles will mean lower premiums, but lower deductibles will make a big difference when you really need the coverage to kick in. Looking at different providers, see what deductibles are available and then, with those numbers in mind, see how much you can realistically afford in premiums. I think you’ll end up with better coverage if you think about the deductible first and the premium second because you’re less likely to go with the most basic option.
2. Replacement versus cash value. In the event of a loss, you have the option to collect in either replacement or cash value. Actual cash value pays out the depreciated price for your home and possessions, so this option usually comes out to be less than the replacement cost. Because of this, insurers prefer and typically offer lower premiums for the cash value option. If you meticulously detail and document everything in your home, this could be a good option since you’ll have a better chance of getting adequately compensated for lost property and possessions. Again, this will come down to what you feel you can afford each month and how you personally value your property.
3. Consider bundling. If you already have car insurance and you feel like your provider takes good care of you, bundling home insurance with that same company might offer you the best savings. Two policies are better than one in the eyes of the insurer, so you stand to get a pretty nice discount on your premiums. There are pros and cons that come with bundling, and I’ve laid those out in more detail in a post on GoFarWithKovar.com. My main advice is to bundle with caution and don’t get too excited when you see a huge discount.
Insurance is tricky but important. As long as you do your homework and shop around you should be able to get what you need. Keep asking questions and good luck with the new home!