Buying a new home is an exciting time. Yet, for first-time buyers, the process can be overwhelming. There is a long list of to-do’s that buyers must accomplish in a short amount of time. One of the most important steps is buying home insurance.
Homeowners insurance is generally required for any mortgaged home purchases and is an important choice for cash buyers. You’ll need to get your insurance shopping done before closing on your new home. It’s a must-have that should be in place when the papers are signed.
What is Homeowner’s Insurance?
Homeowners insurance is a policy designed to protect you and your home from liabilities that are common with homeownership. If a storm pulls the roof off your home, your homeowner’s insurance policy should cover the cost of repairs. If a guest in your home falls down the stairs, that same policy will cover medical treatment and protect you in the event of a lawsuit. It’s easy to see why homeowner’s insurance is a necessity for anyone, regardless of how they have financed their home.
When to Buy Homeowners Insurance
After you have selected a home, made an offer, and entered a purchase contract, it is time to select a policy that suits your needs. There will generally be a window of several weeks in between signing this contract and your closing date, giving you ample time to shop around. While you can certainly begin your due diligence earlier, you will not be able to purchase the coverage until you are entering the closing phase.
Importance of Timing when Buying Homeowners Insurance
Ownership is transferred at closing and even though it might feel like a few hours isn’t much of a difference, even half a day can open the door to big losses. If you’re not properly insured and something should happen before you get a policy in place, you will not be covered. Buying homeowners insurance before closing ensures you are covered from the moment you sign the papers in closing. In fact, in most cases, you will be required to show proof of insurance at the closing.
Another reason the timing is important is that the specific details of your property impact the insurance options and premiums. You will need to provide the address, square footage, and property features.
What is an Acceptable Proof of Insurance?
The mortgage company will require general policy documents and proof that the first-year premiums have been paid at closing. The good news is that these are common industry documents and your insurer should automatically provide these documents to you and your lender.
How to Get the Best Insurance Rate for your New Home
There are dozens of variables that factor into your homeowner’s insurance premium. The size of the home you are buying and where it is located play the biggest role, however, your credit-worthiness and claims history are also important factors. Here are a few tips to get a great rate:
Understand What Factors Affect your Premiums
First, knowledge is power. Understanding what insurance companies look at will help you make the right decisions when shopping for a new home. For example, consider:
Location: Whether you live in a rural area with a low cost of living and few risks of natural disasters or a densely populated area in a coastal region plays a significant role. Typical premiums for the same size home can range from $376 per year to upwards of $5,180 per year.
Home Value: The cost to replace a home purchased for half a million will cost more than the cost to replace a typical middle-income family home of $250K. If you buy a more expensive home, plan to spend a little more on homeowners’ insurance.
Deductible: Homeowners have some leeway in deciding how much risk they want to take. Choose a higher deductible for a lower premium with more out-of-pocket risk or a lower deductible with a higher premium.
Coverage: It works the same way with coverage. There are generally a handful of required events in a typical policy and then there are dozens more ways to customize that coverage, adding higher limits or additional coverage to suit individual preferences. Just keep in mind that more coverage means higher premiums.
Personal History: Your credit and claims history are also considered when calculating premiums. The idea is that individuals with poor financial histories are riskier than those with stable histories.
Decide How Much Coverage You Need
Choosing coverage limits and whether or not to bulk up in certain areas depends on your comfort with risk. If you are a risk-taker, you might opt for less coverage. However, if you are extremely risk-averse, you might be happy paying higher premiums to know that you are well-covered. Other considerations include:
Local Home Values
Local Building Codes
Inventory of Personal Belongings
Lifestyle (in the event of temporary displacement)
Shop Around
Every insurance company is offering something a little different. It pays to shop around and find the best rate and coverage for what you need. You may be able to take advantage of a new customer discount or loyalty discount if you already have policies with a certain provider. Keep in mind that the rate is based on the unique features of your property and coverage selections makes a big difference. Take the time to be diligent about your policy features when obtaining quotes to ensure you are comparing apples to apples.
Finding the Right Homeowner’s Insurance Provider
Once you find the perfect home and sign a contract to buy, the next step is finding the right insurance coverage. In many cases, buying homeowners insurance can be as tedious as buying the home itself, so set aside plenty of time for comparison shopping. Check with three to five different providers before making a decision and keep these tips in mind to get the best price.
For help with your homeowner’s insurance needs, reach out to the friendly and caring team at Carolinas Insurance & Investment Group. We’re here to help you get the coverage you need with premiums you can afford. Call us and let us make this easy for you!
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