Have you recently purchased a home, or are you thinking about it? While the task itself is quite challenging and overwhelming, there is another aspect that you must take care of from the get-go, home insurance!
Even though such coverage is not required by the government, most people tend to get it anyways! As per the Insurance Information Institute (III), 95 percent of homeowners have home insurance. This is understandable considering that we all should be ready for the rainy days, despite hoping for the best.
Here are five crucial things you must know for people who are yet to sign up for a home insurance policy.
Table of Contents
Know your home
Just like you took the time to conduct research when purchasing or building your home, you must do the same for home insurance policies. Before entering into this “shopping” phase, you must first know your house in and out.
To get an accurate quote, you will need to keep certain information about your house at your fingertips. And this isn’t the type of information that you may naturally know.
For starters, you need to know things like the age of your roof, the details of the electrical system, and the type of heating system you have! The good news is that if you have conducted a home inspection, this report, along with your house’s listing, will have all the information you need.
Condense it all into a document and take it with you when you are looking for insurance policies. All insurers will ask you about the details before offering you a quote.
Compare home insurance policies
It is good to visit and compare different home insurance providers and policies before settling for one. Do so regardless of the recommendations you receive. This is because every house is different. And just because a certain type of coverage works for someone doesn’t mean it will work for you too.
Since it is a long-term financial decision, be thorough in your research phase. When comparing insurance companies, consider the following factors:
- Customer service rating: This will help you know how well a given company handles claims.
- Financial stability: Research the insurance company’s financial strength to assess its ability to pay its claims in case of need in the future.
- Insurance policy: See which company offers you the most thorough coverage for the best monthly premium.
As a rule of thumb, try to visit at least four insurance companies before settling for one.
Be careful when agreeing to a coverage amount
According to Forbes, one of the biggest mistakes you can make when signing up for home insurance is agreeing to coverage that does not cover the cost of rebuilding your house! In other words, being underinsured.
A 2009 report by United Policyholders discovered that two-thirds of homes in the US were underinsured. This is because most homeowners only get coverage enough for the amount of their mortgage.
Before getting your home insurance, make sure to calculate the cost of rebuilding your house.
You can seek services of home insurance adjustment near you to find the prevailing coverage for calamities, like natural disasters or fire. Then, use a home-replacement cost estimator to find the cost of rebuilding your house.
If the former is more than the latter, you might want to negotiate for higher coverage.
Read between the lines
Any home insurance policy can seem quite complicated. After all, the jargon of such policies tends to be for the experts. Don’t be afraid to ask multiple questions about the policy in case of confusion. Also, make a point of reading the policy carefully before agreeing to it.
Generally, there are three important components in any home insurance policy:
- Dwellings: This refers to the loss or damage coverage of the building you reside in.
- Contents: This refers to the loss or theft coverage of your possessions within your house.
- Personal liability: This refers to the repair, medical and legal cost coverage if you cause unintentional harm to others on your property or due to your property.
Make sure you are clear on what perils you are insured against. Sift through the policy to identify any exclusions and analyze whether their absence is something you can live with. Also, dig deeper to see how the policy defines different perils.
For instance, coverage against “electrical surge” may not always translate to coverage for short circuits. It may only cover certain scenarios like smoke damage caused by malfunctioning devices, not the electrical system.
So, if you find any grey areas in your policy, probe as much as you can.
Be transparent with your insurer
To get home insurance, there are certain contractual obligations you must abide by. In case you don’t follow through with them, at any point of using the insurance policy, the home insurer has the right to deny your claim or as far as invalidate your home insurance all together.
Therefore, know these obligations in and out. Here are some examples of them:
- Business use: Your home insurance is not insurance for your business. If you run a home-based business, you must notify your insurer. Claims arising because of it are usually not covered.
- Poor maintenance of home: Refusal or failure to upgrade or maintain your house and expecting the company to pay for the repair cost will land you with a denied claim.
- Home-sharing: You cannot rent or lease out your home without notifying your insurer.
Be upfront with your insurance company. Let them know before making major changes to your house (leasing, renovation, renting, etc.). This will help you since they will guide you better on how to protect your home and interest given these changes.
Be mindful of these five factors before you sign up for a home insurance policy. This will ensure that you make a decision that truly helps you in case of a disaster.
We understand that purchasing or moving into a new house is a difficult task on its own. And so is buying home insurance. But, in the long run, it is for your own good. So, take a deep breath and begin the process today!
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