Buying your first home is an exciting time; however, there’s a lot to get together before you’re able to move in. One of these things is homeowners insurance. Before your lender hands over the keys and finalizes your loan, you’ll be required to show proof of homeowners insurance. Many lenders provide insurance agent referrals, but you’re responsible for making sure the policy provides enough coverage for your home and belongings. So, what things should you be paying attention to when getting your first homeowners’ policy? Let’s take a look.
Know Your Limits
One of the main functions of your homeowners policy is to pay for the repair or rebuild of your home if it is damaged or destroyed by fire, hurricane, hail, lightning, or other disasters listed in your policy. However, one of the common mistakes is undervaluing the home. It is important to work with an experienced agent to determine the correct value of the home in case a disaster strikes.
Another important thing to consider when getting a homeowners policy is your coverage limits for your belongings. This includes clothes, furniture, electronics, jewelry, and more. With that in mind there are certain sublimits you should be aware of. An example of a sublimit is a $2,000 limit on jewelry. This means any piece worth more than $2,000 has to be protected by “scheduling the item.”
Learn Your Exclusions
On most policies there are many exclusions you should consider getting a separate policy for. Depending on your state and coverage, common exclusions are Flood, Earthquakes and landslides to name a few. If your property is at risk for one of these perils, it’s important to purchase separate protection for these excluded incidents.
Understand Deductibles
A deductible is the portion of the claim you’re responsible for. Deductibles tend to be a flat rate or a percentage of the claim. Some deductibles are split. This means you have a flat deductible for all perils except for incidents caused by wind/hail and or hurricane. For example, let’s say you have a homeowners insurance policy with a 5% wind/hail deductible and have a $7,500 roof claim. If your home is insured for $200,000, your deductible would be $ 10,000 and you would be responsible for the entire claim of $7,500 while your insurance company would pay nothing. However, if you had a flat rate $2,000 deductible you’d pay $2,000 while your insurance company would pay the remaining $5,500.
Make sure you understand your policy and the deductible(s) and more importantly how they are applied.
There are many ways to structure a homeowners policy that fits best for your financial situation so be sure to talk with an experienced agent before you buy.
