5 Things Homeowners Should Do When Buying Insurance

Homeowner insurance (also known as home insurance) isn’t a luxury; it’s a necessity. Since your home is probably your biggest investment, damage or loss to your property can be emotionally and financially devastating. In some cases, homeowners insurance is required. For example, if you have a mortgage, your lender or mortgage company will typically require you to have homeowners insurance.

Having the right insurance can protect the physical structure of your home, your personal belongings from theft, or even medical bills if a guest is injured on your property. If you’re planning on getting homeowners insurance, keep reading for some of our basic tips!

1. Shop for coverage early

It’s a good idea to shop for homeowners insurance as soon as you sign a contract to buy a home. Although you may not own the home before your closing, mortgage companies will want evidence of insurance (also called a binder) a few days before the closing. This gives you time to become familiar with the coverage you need so that you can do a better comparison among different insurance companies.

Additionally, having insurance early gives the insurer more time to determine the appropriate level of coverage. This can be important if your home has special or costly details, like rare woodwork or a fancy built-in sound system.

2. Insure your home based on the cost to rebuild

When you’re buying home insurance, you might think that it makes sense to base your coverage limit on the market value of your home. However, the reality is that the market value does not necessarily represent the cost to rebuild the home— so you could be left underinsured in the event that your home is destroyed and needs to be rebuilt.

While some areas have high market values compared to rebuild costs, it’s important to check with your home insurance broker to determine what limit is right for you.

3. Purchase additional water damage coverage

Most standard home insurance policies help cover water damage if the cause is sudden and accidental, such as burst pipes or malfunctioning appliances. However, this does not mean that your policy will cover every kind of water damage that can occur to your home. Water from external sources, such as heavy rainfall, a quick spring thaw, a sewer backup, or a sump pump failure, is generally not covered— and recently, the list of exceptions has expanded to include certain water heaters.

To avoid potential financial trouble, don’t assume your home insurance will cover every type of water damage. Instead, it’s a good idea to contact your broker for more information and whether there’s additional water coverage that is available.

4. Don't undervalue your personal belongings

It’s quite common for people to undervalue the worth of their possessions. As we go about our day-to-day lives, it’s easy to forget about all the items we own if we’re not using them every day. However, homeowners must have an accurate idea of the replacement value of their belongings.

Imagine how financially devastating it would be if you suddenly had to replace every single thing you owned. Nobody expects these things to happen, but you can protect your possessions and give yourself peace of mind in case they do. Although it may seem like a daunting task to tally everything you own, you can start by making a list of your belongings according to the rooms where they are located. Once you have a record, make sure to update it at least once a year, and include any significant changes to your possessions or their values. 

Be aware that different insurers offer different coverage limits, so don’t assume that you are insured for the full value of your home insurance policy entirely. If you have questions, contact your insurance broker and get the answers you need.

5. Choose a deductible that you can afford

In an insurance policy, the deductible is the amount that you’re responsible for paying in the event of a claim. When you’re shopping for home insurance, you’ll probably notice that choosing a higher deductible typically leads to a lower premium — but keep in mind that you should choose a deductible that you can actually afford to pay.

Even though a lower deductible might mean your premium payments are slightly higher, it could be easier for you to manage than paying a larger lump-sum deductible in the event of a claim. Taking on a higher deductible may seem tempting to keep your insurance payments down, but it could put you in a sticky situation if you need to make a claim in the future.

Unlike auto insurance, home insurance isn’t required by law, but most mortgage lenders will require that you purchase a homeowners insurance policy before extending you a loan. By securing the coverage you need before you even move into your new home, you can safeguard your property from disaster.

Knowing your various insurance policy options and doing proper research allows you to have peace of mind in knowing that there’s a financial safety net if the unexpected occurs.

If you have questions about your own policy or need help updating your coverage, please don’t hesitate to contact your licensed insurance broker.