Home insurance policies are there to financially help when mishaps happen to your property. It funds necessary repairs and replacement to keep a home in good shape. That’s why most lenders require buyers to get an insurance policy to qualify for mortgage loans.
But buying an insurance policy requires you to dig through complex info. You should make smart decisions to get the right help when the time comes.
Key Points in Buying Homeowners Insurance
Confused about finding the right homeowners insurance today? Here are valuable guidelines to take note:
Find Reliable Insurance Companies
Be sure many homeowners trust the companies you consider. Ask around your friends, acquaintances and even your realtor for recommendations they trust. Checking online reviews would help as well. Choose one with high rates of customer service satisfaction, especially that you’d most likely get in touch with them on times of mishaps.
Then, see which company offers the best favorable insurance policy. Read on to know the important points in weighing one policy to another.
Carefully Weigh Insurance Coverage
There are many factors that make insurance policies differ from each other. And in making your choice, put included and excluded perils, mode of paying and mode of reimbursement as big decisive points.
Included and Excluded perils
These are the primary factors that tell the level of an insurance policy. For example, HO-1 or the basic form of home insurance only lists around 10 perils for inclusions. That’s why many mortgage companies don’t suggest to buy such level of policies anymore since they argue those inclusions aren’t enough.
On the other hand, HO-2 insurance is a wider form of HO-1, since it includes other perils which are usually not included in HO-1.
Ho-3 level generally includes all perils, but it specifically excludes other perils. This makes it the most common choice for homeowners today. And there are other forms of insurance policies that inclusions and exclusions affect.
And if you see your policies don’t include certain perils, such as for flood, get rider insurance for it. Such insurance can cover perils that are not included in standard policies.
Mode of Payment
You need to pay a premium for your insurance policy. That’s why you should find a mode of payment that’s favorable for you.
Yes, you can pay it personally to the insurance company. But you can put your insurance to escrow as well. Your premium will be included in the monthly rate you need to pay for your mortgage, and the lender will give your premium to the insurance company for you. You can trust them since they want to keep their investment, which is your home, in good condition.
Mode of Reimbursement
There are three common types of insurance reimbursement to choose from:
- Cash Value –This is usually the most affordable insurance policy and involves you receiving cash for reimbursement. However, this usually comes in smaller payout as well, since this involves subtracting depreciation value from the item requiring replacement.
- Replacement Cost – This involves replacing an item without depreciation value decrease. But if an item exceeds the specified maximum value, you should pay the remaining amount.
- Guaranteed Coverage – This is similar to replacement cost coverage, but it doesn’t have any value limit.
These are a few of the most important points to know in finding home insurance to buy. Be sure to ask your realtor for further clarification. That would lead you to the right valuable choice.
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