What You Need to Know Before Buying Homeowners Insurance


Congratulations! You have finally found your dream home and you’re in the process of closing escrow, but have you done your research to see what insurance policy you should go with?

Sure, the policy with the lower annual premium is appealing, but keep in mind that cheap insurance isn’t always better. Speak to an agent and be informed about what you’re buying to ensure that your dream home is properly covered.

Actual Cash Value:  covers what the house might be worth, but not what it would actually cost to rebuild it if an event were to occur.

Replacement Cost Coverage: covers the repairs and rebuilding cost, even if they exceed the market value of your home, as well as the removal of the debris.

Named Peril Policy:  tends to be less expensive, covering only what is listed on the policy. For instance if there were damages caused by a tornado and the policy does not specifically state that tornado damage is covered, you would not be covered.

All Risk Policy: covers any loss to the home unless the policy specifically excludes it.

Standard Home Insurance Coverage: ABC’s (and DEF’s)…

All mortgage companies require that you have homeowners insurance at the time of closing. If you do not obtain insurance at that time, the mortgage company will force place insurance of their choice. When there is forced placed coverage you can expect to pay double the price of a private market policy. Now, if you bought your home in cash you don’t have to have homeowners insurance. However, not insuring your investment is a poor business decision. The unexpected can happen to anyone at any time and when it does, it can be devastating. Having homeowners insurance doesn’t stop the unexpected from happening, but it does help you rebuild your dreams when it does.

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