4 Things to Know Before Securing Homeowners Insurance

Buying a home can become a complex process and feel pretty overwhelming to most people, and securing homeowners insurance can be difficult. Additionally, one thing that may get lost in the chaos is the importance of securing your homeowners insurance policy. Never underestimate this protection. Giving proper thought will help avoid a financially devastating situation if something happens to your home. Before committing to your homeowners policy, here is what you should know to help you along the way.

Finding the Right Coverage for You 

Your mortgage lender will most likely mandate proof of a homeowners insurance policy to proceed on their end. Likewise, sometimes they need an additional policy like flood insurance. It is best to secure these protections with an insurer that you feel offers the most value to you. Additionally, they should provide sufficient customer service. Consider the different types and amounts of coverage to secure a protection plan that suits you best. 

Escrow Insurance Payments with Mortgage Payments

Typically, homeowners opt to apply for their monthly insurance payments on their mortgage payments. Then, the lender will then pay the insurance premiums and usually the property taxes out of your escrow account. It is generally the preferred option from the lender's side. They like this because it allows them to confirm that your insurance premiums get paid. In addition to that, it ensures that their investment has complete protection. It is common to pay for one year of insurance at closing. Be sure to bring all the information regarding the insurance policy you choose and your first year's premium.

Consider Unique Risk Exposures to Secure Adequate Coverage.

The levels of coverage make homeowners insurance intriguing. You do not want to pay for more than you need. Alternatively, you also don't want coverage gaps. The following are typical coverage levels:

1. An HO-2 provides broad protection against the specifically named perils in the policy.
2. HO-3 gives protection to all perils except those specifically excluded by the policy.
3. An HO-5 is a premium policy typically for newer and well-maintained homes, covering all risks except those specifically excluded by the policy.
4. HO-6 is when Co-ops/condominiums' insurance plan covers personal property, liability, and owner's unit renovations.
5. An HO-7 protects mobile homes from all perils except those specifically excluded by the policy.
6. HO-8 delivers broad protection specifically for older homes specifically named perils in the policy but only covers actual cash value.

Understand your Policy Details

It is simply not sufficient to secure the right policy level. Also, you must thoroughly understand the homeowners insurance policy terms. Here are the main concepts to grasp:  

Deductible 

The out-of-pocket pay before the policy steps in and the higher it is, the lower the annual premium will be.

Premium

The price that you as the customer pay for coverage, usually annually or monthly.

Liability Coverage 

Covers the medical or legal bills if an individual becomes injured on your property, usually due to negligence.

Personal Property

Protects the constants of the home, such as furniture, electronics, and clothing. 

Replacement Cost 

It covers the total cost of replacing your dwelling or personal property up to the specified limit. 

Actual Cash Value 

Offers the current cash value (with depreciation) for personal property or your dwelling. 

Sub-Limits

Insurance policies have limits and commonly sub-limits as well. For example, a personal property policy might have a 50 percent of dwelling coverage sub-limit. You can ask your insurer how this might apply to you. 

Riders

People can add policies to the overall insurance plan to cover specific items. 

About David G. Sayles Insurance Services

At David G. Sayles Insurance Services, we help our clients decide which of these options is best for them based on their current situation and risk factors. Contact us at 1-855-977-1842 or insureme@dsayles.mysites.io for a consultation!