Insurance is not a favorite topic, but it’s an important one. And for homeowners, it can mean the difference between protecting your investment at an affordable rate and overspending for poor coverage that leaves you vulnerable to expensive problems and issues down the road.
Whether you have a house under contract and are looking for a homeowners policy to get approved for a loan, or you’re a current homeowner who wants to shop around for a better rate/coverage, it’s helpful to know how to go about it.
Why You Need Homeowner’s Insurance
Your home is almost certainly the largest assets/investment you own. Unfortunately, it’s also exposed to numerous risks and threats. This includes natural disasters, burglary, vandalism, and malfunctioning home systems. But homeowners insurance can reduce the severity of these risks and provide financial protection and peace of mind.
Here are some specific reasons why homeowners insurance is needed:
Mortgage lenders require it. Let’s say you buy a house with 25 percent down in cash. That means the bank really owns three-fourths of the house. They aren’t going to give you a loan unless they know their money is tied to a protected asset. This is why lenders require homeowners insurance in order to release funds at closing.
Protects your investment. Your home is an investment. If you’re like most people, you don’t have the cash to fix a massive problem out of pocket. A homeowners insurance policy allows you to pay for coverage so that you can get the repairs needed in case of a major disaster.
Covers personal belongings. Homeowners policies also cover certain personal belongings, should they be stolen or damaged. This is ideal for expensive items like jewelry, electronics, and other valuable effects.
Protects liability. As a homeowner, you can be held liable for anything that happens on your property – including an injury to a friend, neighbor, delivery person, or handyman. The good news is that your homeowners policy also provides certain liability protections.
So whether you’re buying a house with financing or you already own a home in cash, you can clearly see how the right homeowners insurance policy is an important investment for you and your family. Even if you toss the financial side of the equation out, there’s significant peace of mind that comes from having the right policy in place.
5 Tips for Choosing the Right Policy
Now that you understand the significance of having a homeowners insurance policy, let’s get down to the nitty-gritty details. Here’s how you can find the right policy for your needs:
Shop Around for Quotes
The first and most obvious tip is to shop around for quotes from different insurance companies. There are big national companies, smaller local companies, and everything in between. Rates can vary quite dramatically from one insurance provider to the next, so it’s wise to get at least three quotes.
These days, you can plug your information into one of the many tools online and get a bunch of quotes within a matter of hours. This is a good starting point, but you’ll want to narrow your list down and get some more concrete numbers from each provider before proceeding.
Look for a Reliable Insurance Company
Cost-conscious homeowners often get caught up with the pricing of different policies, but make sure you’re looking past this. After all, what does it matter if one plan costs $50 less per month if the insurer doesn’t treat you fairly?
“In our summer 2018 homeowners insurance survey—answered by more than 81,000 Consumer Reports members—nearly 7,000 respondents told us how satisfied they were with their experience when they had a claim,” Consumer Reports explains. “Companies’ damage estimates were among the best predictors of customer satisfaction. Lower-rated insurers tended to have a greater percentage of customers who disagreed with their damage estimates and felt their final settlement was too small.”
Do your research, ask friends and family members for referrals, read online reviews, and gather as much information as you possibly can. Reliability and fairness are far more important than price.
Determine the Coverage You need
If you’ve never read the details of a homeowners insurance policy, you might not be familiar with what they actually cover. For the most part, the list of covered perils includes:
- Fire, wind, smoke, hail, lightning, and explosions
- Trees and other falling objects
- Vandalism and theft
- Weight of snow and ice
- Damage from vehicles and aircraft
- Water damage from ruptured pipes
But even though most policies cover these issues, the deductible, amount of coverage, and additional coverage on other items varies.
Homeowners policies generally range from HO-1 to HO-5 ratings. The lower the rating, the more basic the policy. As you go up in rating, the policy gets more expensive.
Compare Apples to Apples
When comparing insurance policies from different providers, make sure you’re comparing apples to apples. If you’re trying to compare an HO-2 policy to an HO-4 policy, you’ll just end up confused and frustrated.
Take Advantage of Discounts
There are often ways to lower the cost of coverage by taking advantage of discounts. Here are two common ones that homeowners often qualify for:
- Bundled coverage. You can almost always save money when you bundle your home and auto together with the same company. Sometimes you can lower rate by as much as 30 percent.
- Home improvements. Sometimes all you have to do is upgrade your home and your insurance company will lower your rate. Something like an alarm monitoring service or gas-leak detection sensor could bring your premium down by 2 to 5 percent.
You also have the option of upping the deductible. When you pay a higher deductible, you get lower premiums. For example, going from a $500 to $1,000 deductible can lower your payment by as much as 25 percent.
Smart Homeowners Work With Smart Companies
At Green Residential, we understand the importance and significance of working with the right companies. Whether you’re a homeowner or a real estate investor with a portfolio of rental properties in the Houston area, we would love to help you buy, sell, and maintain your properties. Contact us today to find out more about our services!