When buying a new home, you will also need to purchase home insurance. This coverage is always required by your mortgage company, and there are minimum amounts of coverage that your lender may require you to buy. Even if you do not have a mortgage on your new home, property insurance is necessary in order to protect your financial investment in the asset. After all, you stand to lose hundreds of thousands of dollars or more if your home is damaged or destroyed. When you are shopping for a new home insurance policy, look for these factors to get the best deal possible on your coverage. Suitable Coverage One of the first things to consider when comparing policies relates to which events are covered and which are not covered. Coverage can vary substantially, so it is important to know what type of coverage you need and prefer. For example, earthquake coverage may not be necessary when buying a home in Florida, but flood and windstorm coverage is. Fire and theft coverage are common, but you may need to purchase mold coverage separately. Flood coverage is not required in all areas, but it may still be useful for most homeowners because flooding can happen from a variety of events. Reasonable Replacement Value Some first-time home buyers assume that a home insurance policy will pay to completely replace their home if it is destroyed, but this is not always the case. These policies are written in different ways, and they have different coverage limits. For example, some policies only pay for the replacement cost of the home up to a pre-determined limit. You do not need to insure the land because the land will never be destroyed. Therefore, your sales price will not equal your replacement value. However, the replacement value should be reasonable to build a new home of similar square footage and quality in your area. Protection for Your Personal Property Home insurance also usually provides coverage for your personal contents or assets inside the home. After all, if your home is destroyed by a tornado, earthquake or other similar event, there is a good chance that you will need to buy new clothes, furniture, electronics, appliances and more. It can be difficult to place a value on the contents in your home. A smart idea is to itemize as many items in your home as possible. Estimate their value in a list, and take photos of the belongings. Provide these items to your insurance agent so that they are on file in the event you need to file a claim. Great Rates and Discounts The cost for home insurance can vary substantially, and you understandably want to get a great rate on your policy. Many insurance companies offer cheap auto insurance to homeowners who bundle their auto and home coverage together. You may also get a lower rate overall if you buy a life insurance policy from the same insurer. While you should compare the basic rates for home coverage, focus on the net costs for all types of insurance you plan to purchase through the insurer in a bundled package. Steps to Reduce Rates Further Many insurance companies also provide homeowners with additional methods for reducing coverage rates over time. For example, you may obtain a list of improvements you can make to the home for discounts, and you can slowly work your way down the list over the course of the next few months. Many insurers, for example, offer lower rates if you have a monitored security system installed. Home insurance coverage will likely be one of the more expensive aspects of home ownership, but it also can prevent you from experiencing considerable financial loss in a worst-case scenario. If you are preparing to buy home insurance soon, keep these concepts in mind to get the best coverage possible at a competitive rate.
David Glenn is a home improvement expert. He occasionally freelance writes about home maintenance and DIY home repair. He’s also knowledgeable about topics like how to improve social presence and building a reputation online.
