These are the Four Questions You Need to Ask Before You Buy Homeowners Insurance

What is Homeowners Insurance? These are the Four Questions You Need to Ask Before You Buy Homeowners Insurance

While Buy Homeowners Insurance might not be as exciting as choosing the right furniture and paint colors for your home, it is a crucial part of the homebuying process. Your homeowners insurance policy can be a financial safety net in the event that a disaster strikes. You’ll need to ask several important questions to ensure you have the coverage and price you are able to afford.

What is the average dwelling area per square foot?

Imagine your house was set on fire by a wildfire and your policy doesn’t cover the cost of rebuilding it. If your dwelling coverage (the part of your policy that covers the structure and contents of your home) is too low, this could be a possibility.

You can avoid this by not accepting the insurance company’s initial dwelling coverage amount. Ryan Andrew, President of The Andrew Agency, an independent insurer serving Washington, D.C., Maryland, and Virginia, states that insurance companies use replacement cost calculators, although they are not always accurate.

Amy Bach, executive Director of United Policyholders, an organization that advocates for insurance consumers, recommends asking your insurer to send someone to inspect your home for a more accurate estimate. A local builder who is skilled in new construction can estimate the cost of rebuilding your home per square foot.

After you’ve selected a dwelling limit that is appropriate, you might consider adding additional replacement cost coverage to the policy. To help you rebuild, your insurer will pay between 10% and 50% more than the dwelling coverage amount. This coverage can save you thousands of dollar if your building costs rise because of an unforeseen reason, such as a lumber shortage after a disaster.

This is the most expensive option. Guaranteed replacement cost coverage will pay for any home reconstruction costs.

What if I have multiple deductibles

It is possible for homeowners to not be aware that some policies have higher deductibles in case of claims due to hail, wind, named storms, or other disasters.

Let’s say that a hurricane damages your roof. Andrew points out that your insurance policy might include a wind deductible equal to 5% of your dwelling coverage, rather than the $1,000 deductible applicable to most other claims. In other words, if your house was covered for $250,000 you would need to pay the first $12,500 in damage before your insurance company paid any.

These high deductibles might be reduced or eliminated by getting quotes from several insurers.

What isn’t?

It is possible to be surprised at the exclusions on your policy. Andrew says that flood insurance is an exclusion on nearly all homeowner policies. This is especially true for basement homeowners.

Andrew says even houses that aren’t close to a body water could flood in heavy downpours. A standard homeowners policy won’t cover any of this damage.

Flood insurance can only be purchased by companies that participate with the National Flood Insurance Program. The average flood claim payout in 2019 was $52,000.

Andrew suggests that you also add water backup coverage on your policy. This coverage covers water damage caused by water backing up from your house via sump pumps, sewer lines, or other water lines.

Maintaining current building codes is another common coverage gap. Bach states, “If the codes have changed since you built your house, a typical policy will not cover that.”

How can I save?

While it is important to have the right coverage, you can still get discounts that will make your policy more affordable. Andrew suggests that you purchase your homeowners and car insurance through the same company. Bundling discounts can help save you up to 20%.

Bach says that the best way of lowering your premium without sacrificing coverage, is to increase your deductible. Lower premiums can be achieved by being willing to pay for repairs that are smaller than claims.

To clarify your questions regarding coverage and discounts, contact an insurance agent. Andrew suggests that you take the time to learn about what you’re buying. “A house is for most people the most expensive asset they own.”

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