How to Purchase a Homeowners Insurance Policy

So you’re buying a new house!  Congratulations!!

There are very few things as exciting as purchasing a new home.  I remember when I bought my first home.  Settlement was at 9 AM.  The housing market crumbled by noon.  I think if I would have purchased the same home 2 days later I would have saved about $20 grand!!  But that wont happen to you because things are back on the rise and you are buying at a GREAT time.

First thing you want to do once your offer has been accepted by the seller is call your insurance agent.  Do not attempt to purchase a homeowners policy without an insurance agent.  You will pay more and you may not have all of the coverages you need.  I recommend an independent insurance agent simply because they have more carriers to look at.

Make sure you have as much information as possible on the house.  Year built, style of home, square footage, is the basement finished, fireplace, how many bathrooms, decks, porches, garage, etc.  You should have a seller’s sheet with all the necessary information needed to give to your agent.  Your agent will then plug that info into a computer program called a cost estimator.  This is used to come up with the replacement cost of the house.  The replacement cost of the house may or may not be the same as the sell price.  The replacement cost of the home is the amount needed to rebuild the house in the event of a total loss.  Your agent will most likely need to do an exterior inspection of the house to make sure all of the information is accurate.  At this inspection, the agent is also looking to make sure there are no issues that underwriting would have if the insurance company were to inspect the property.  Common issues that underwriters have with new homeowners policies include missing handrails on steps, trees leaning on a house, poor upkeep of the house, as well as missing shigles and prior damage.  I would even recommend that you ask the agent to do an inspection as this could save major headaches down the road.

Your agent should make sure you have the correct coverages.  However, you should make sure you have a Replacement Cost Value (RCV) policy and NOT an Actual Cash Value (ACV) policy.  Make sure your liability limits are at least $300K for personal liability and $1,000 for medical payments to others.  I highly recommend an endorsment for Water Backup and Sump Discharge or Overflow.  This is an endorsement that must be added onto the policy.   If you have a finished basement, get at least $10K worth of coverage.  The first $5,000 will be spent just drying out the basement.  If you have expensive jewelry or computers or any other expensive items that you would replace if lost stolen or broken, I would advise putting them on a Personal Articles Floater.  This will provide coverage for the items with a much lower deductible or no deductible at all.  Otherwise you will be subject to the much higher deductible that is on your homeowners policy.  I would also consider adding an endorsement for additional replacement cost coverage on the dwelling.  25% is adequate.  This will protect you in the event that the cost of building materials skyrocket.

If you are a first time home owner, I would recommend a deductible of $500 or $1,000.

Your agent will look at all of the available carriers that they represent to determine what is the best fit for you.  The company they recommend may or may not be the same company that has your auto insurance.  In fact, you may find it is best to re-write the auto insurance depending on the new discounts that are available to you.  Put your agent to work for you, that’s why we are here.  If your agent does not make your account a priority then you should find a new agent.

Good luck with your new home!!

Keith Laskey

Ron Black Agency/The Laskey Group



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