First Time Homebuyer Insurance Guide

One of the steps when buying a home is to get homeowners insurance. This can be an anxiety inducing task for a first-time homebuyer. Never fear because here is a home insurance buying guide with everything you need to know. And alleviate that anxiety right now, here’s a little secret: your lender won’t let you mess it up.

How Does Homeowners Insurance Work?

Homeowners insurance protects you by providing monetary payments in the event an event included in the coverage occurs on your property. Home insurance when buying a home protects you, the homeowner, and the mortgage provider, too. This is because if a covered event occurs on your property insurance protection will cover the costs of the injury or damage.

Homeowners insurance covers typical disasters which could damage or destroy the property as well as injuries on yourself or guests at the property. Here is a list of events which are commonly covered by homeowners insurance:

• Fire
• Natural disasters including tornadoes, wind damage, hail damage, earthquakes, and lightning strikes.
• Dog bites
• Slip, trips, and falls occurring on the property
• Other injuries occurring to the homeowner or residents while enjoying or maintaining the home and injuries to guests invited to the home

Be aware, flood insurance, basement water seepage, and landslides are not typically covered in basic homeowner insurance policies.

Do You Have To Buy Home Insurance?

Answering do you need home insurance when buying a house depends on how you are purchasing the home. If you are getting a mortgage the lender will require that the home be insured. Additionally, the lender will require that the insurance policy meets their minimum coverage guidelines.

On the other hand, if you are buying a home with cash you do not have to purchase homeowners insurance. However, not buying homeowners insurance is very risky. If the property was damaged or destroyed or someone was injured while at the property there would be no financial assistance to protect.

How Much Home Insurance Should You Buy?

Selecting house insurance when buying a house is not too difficult. First, insurance companies have designed policies which generally cover what you need. Secondly, your lender will have guidelines about what coverage must be included. But, let’s take a look at some of the specifics of purchasing homeowners insurance.

Dwelling

The insurance on the dwelling describes what is included. Typically this will include the land and all improvements upon the land. An improvement is anything not part of the Earth. Improvements include the home structure, detached buildings including sheds, sidewalks, and driveways. Insurance should cover the replacement cost of the dwellings including up to a total loss.

The amount of dwelling insurance depends on the value of your home and its perceived replacement cost. Therefore, everyone will have a different recommended amount.

Personal Property

Personal property is all of the things that you own and store in the home. This includes everything from clothes to televisions and your lawnmower. Most homeowners insurance policies cover personal property in the range of $100,000 to $200,000.

Some homeowners should add additional insurance for specific items. Additional insurance may come in the form of a separate personal property policy. This would matter if you have highly valuable items or collections including jewelry, art, or collectibles stored in your home.

Liability

Liability insurance covers the costs of injury occurring on your property. Imagine that you have a guest over and he or she slips and falls and is injured. Dog bites are also typically covered by a homeowner’s insurance policy. It is important to have liability insurance for injuries. It is typical for a homeowners insurance policy to include yup to $300,000 of liability insurance per incident.

When To Get Homeowners Insurance When Buying A House

Knowing when should you get home insurance when buying a house is important. Shopping for and selecting the homeowners insurance should take about one to four hours depending. It varies depending on how many companies you contact for a quote.

You should get homeowners insurance no later than two weeks before your scheduled closing date for your home purchase. This gives the insurer enough time to produce and bind the policy and send it to your lender. Then, your lender will review the policy and confirm it meets the lender’s minimum insurance guidelines.

What To Do Before You Buy A Home Insurance Policy?

You will want to follow the right process when you buy house insurance so you get the best deal.

Be Aware Of Your Credit Score

Your credit score affects how much your insurance will cost. Yes, unfortunately homebuyers with a lower credit score will pay more than a homebuyer with a higher credit score purchasing the same home. Improving your credit score can lower your homeowners insurance costs.

Know Details About The House

Ask your real estate agent for a property description detail sheet. Many real estate agents can produce this. Here, you will find all of the important information about the house. Details such as the age of the home, design style, and construction materials affect your homeowners insurance premium.

Shop Around With Several Insurance Companies

I often encourage homebuyers to shop around with numerous homeowners insurance companies to find the best rate. Contact several insurers and get a quote for homeowners insurance coverage.

Cost Of Insurance For First-Time Homebuyers

Several factors have a major effect on the cost of homeowners insurance. These factors are unique to each buyer and each home.

The circumstances of the home itself affect the rate. One of the factors with the greatest impact is the age of the home. Newer homes cost significantly less to insure than older homes. Homes in lower-risk areas are cheaper to insure, too. Low risk areas have low crime rates and lower risks of natural disasters. Homes in cities with fire hydrants and fire protection have lower rates compared to homes in rural areas, too.

The homebuyer’s circumstances affect the insurance premium, too. First, homebuyers with a higher credit score are frequently offered homeowners insurance at a lower cost than homebuyers with a lower credit score. Secondly, insurers will review your insurance claims history to determine your rate.

How To Get The Best First-Time Homeowners Insurance Rate

Selling homeowners insurance is a highly competitive business. Knowing how to be a smart shopper can help you get a better deal.

Look For Discounts

One thing to know about how to buy home insurance is to look for an insurer who will offer a discount for a reason that others won’t. For example, maybe one insurance company will offer a discount due to some condition on the property such as having a sump pump. The best way to find this out is by contacting several insurance companies and comparing their offers.

How To Compare Homeowners Insurance Quotes

You need to compare insurance quotes you received to one another. It is important that you correctly compare these quotes. Make sure that each has the same amount of coverage. Also, check the deductible for each policy. Buying a policy with a 20% lower premium but a 200% higher deductible and 50% less coverage really isn’t the best deal. Remember, being thrifty isn’t always about taking the cheapest option.

Ensure Your Property Characteristics Are Accurate

Make sure the insurer has correctly recorded all of the details about the property. Errors in the description of the property to be insured can cost you money. For example, the cost of insuring a home built in 2022 is much less than a home built in 2002. The total square footage, inclusion of certain features, and many other details affect your premium. Make sure the insurer is working with accurate information.

Bundling

Many insurance companies offer steep multi-line insurance. You absolutely should contact your auto insurance company to learn what they can offer you by adding a second line of insurance to your account. Though the homeowners insurance may not be that much cheaper than a competitor, your auto insurance could be reduced significantly.

How To Keep Your Homeowners Insurance Rate Low

There are ways to keep your homeowners insurance quote low. First, try not to make any claims against the property. Yes, insurance is there for a reason. But, do not be petty about filing a claim. Really evaluate whether or not a new claim is worth what it could do to your annual premium before filing the claim.

Secondly, ask your insurer about any riders that can be added once you purchase the home. For example, many insurers will lower your homeowners insurance more if you provide proof of adding certain features to a home. These often include adding or improving smoke detectors, carbon monoxide detectors, and fire extinguishers.

Conclusion

Purchasing homeowners insurance as a first-time homebuyer is not too difficult. Contact insurance companies, tell them you are buying a home and need homeowners insurance, and provide detailed information about the home. Once you receive some quotes, compare those to one another.

The Quadwalls Real Estate Team is here to help you find and buy your new home. Additionally, we provide every homebuyer with a property detail sheet so they can answer all of the insurer’s questions about the property to be insured. Feel free to start finding and buying a home with Quadwalls.com. Or, contact us any time with your real estate related questions.