Do Your Homework –Save Your Money & Sleep Well At Night!
One of the most important considerations for a homeowner – novice or veteran – is
insurance. When arranging a mortgage you will find that most lenders require that the
buyer have insurance in place before they will permit the loan to close. Some lenders
require that buyers pay the premiums on their homeowner’s policy a year in advance.
Some can help arrange escrow of the homeowner’s insurance in a special account.
Whatever the case be prepared, your home buying budget must include money for
appropriate insurance coverage and the repairs and upgrades necessary to get the
Every homeowner should review his or her policy at regular internals to make sure that
the coverage is appropriate. A wise buyer gets quotes from time to time and checks out
the service offered by other providers.
What coverage do you need?
The time to make sure that you are covered for all eventualities, including natural
disasters, is well before they happen. It is a good idea to review your insurance coverage
annually, to make sure that improvements and new construction are covered and that you
are no longer paying for coverage that you don’t need. Insurance policies can be
confusing. Your insurance agent can explain what the language in your policy means.
Make sure that your policy covers:
• Your home, including rental units and any extensions, attachments, outbuildings
on your property such as greenhouses, tool sheds, separate garages or guest
houses or any other structures.
• The property around your home including lawn and landscaping, as well as vacant
land that you own or rent There is no need to have coverage for the land on which
your home is built.
• Living expenses for you and your family in the event that your home in damaged
and uninhabitable. The policy should also cover rental payments that you would
lose if a rental unit was uninhabitable.
• Your possessions including the contents of your home and other buildings and the
possessions of guests who were staying in your home when the damage occurred.
Don’t forget goods that belong to others but were temporarily in your possession.
If you have tenants they should have content insurance as most homeowner’s
policies do not cover the possessions of tenants.
• Cemetery plots
• Legal fees, court costs, medical expenses that you incur as a result of claims
brought against you for property damage or bodily injury to others
• Protection against fraudulent use of your checks or credit cards or receipt of
• Special coverage against floods, wind or earthquake damage specific to the part of
the country in which you live
In all cases make sure that you are insured for the replacement cost not current market
value, i.e. what it would cost at the present time to rebuild or replace buildings and
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possessions. Make sure that you have floater policies on expensive jewelry, antiques,
sports or specialty equipment. Let your agent know what you have and follow their
advice on coverage.
How to find the best coverage for the best price.
Insurance agencies are not created equal. Like any other product or service, insurance
agencies and their policies differ in price and quality. Premium costs are increasing
rapidly. Many insurers are tightening their renewal policies and some refuse to sell new
policies in high-claim or disaster-prone areas.
The right insurance can mean the difference between financial ruin and recovery so you
owe it to yourself to find out all you can about the service record of your insurance
company. You don’t want a rude awakening when and if you ever have to file a claim.
Ask your local insurance broker for their impressions of the different agencies. What has
happened in the past when clients have made a claim with the company? In other words,
investigate the market before you lay down your hard earned money, just as you would
with any major purchase.
If you are buying a new home, ask your real estate agent, lender or builder for
references to insurance companies that write policies in your area. If you are purchasing a
previously owned home, ask the current owners who their insurer is. It is often costeffective
to have all your insurance with one carrier. If you have automobile insurance,
get a quote on home insurance from the same broker.
For comparison and assessment of rates and services, rely on government agencies
that regulate the insurance industry and insurance industry associations. These sources
will tell you which companies service your area, as well as details on rates and coverage
and how to contact different companies. A wealth of information is available on the
Internet from web-sites run by governments, insurance industry associations and
How to keep your rates down – don’t pay the first price you are quoted.
Shop around. Before you purchase get at least three quotes. Evaluate not just price, but
particulars of coverage and customer service as previously discussed.
• Raise your deductible. The higher the deductible, the lower the premium.
• Buy your home and automobile policies from the same insurer. Some companies
offer premium reductions of up to 15% for multiple policies.
• Protect your home. Maintain and upgrade your heating, plumbing and electrical
systems and check for structural damage to reduce the risk of water or fire
damage. Make your home more resistant to natural disasters. Your rates will be
lower if you have storm shutters, shatterproof glass in windows and doors and a
• Maximize home security. Most insurers offer rate reductions for owners who
install smoke and carbon monoxide detectors, fire extinguishers and dead-bolt
locks. Some offer further discounts for sprinkler systems and fire and burglar
• Find out if you are eligible for discounts. If you are a senior or a non-smoker your
rates may be lowered.
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• Investigate group coverage. You may receive a better rate through a group
coverage plan through your employer or a professional or business group.
• Stay with one company. Many insurers offer substantial discounts for long-term
• Review your policy on a regular basis to make sure that you are covered for
anything new. Make sure you’re not paying for coverage of bicycles, jewelry, etc.
that you no longer own. Special coverage for floods or earthquakes is not included
in standard policies. Make sure that you have the appropriate coverage for your
home, your family and your location.
What can you do if you can’t get insurance?
There are a variety of situations that can make it difficult for a family to get homeowner’s
insurance but it’s not the end of the world if you get turned down by one insurance
company. In some areas major companies are not writing new policies. Rate increases
resulting from increasing payments of mold claims are making insurance unaffordable for
If you live in a flood, wildfire or hurricane-prone area it may be difficult and costly to get
insurance. A poor credit history can also keep you from getting insurance. Living in a
high-crime area or in a home with old plumbing, electrical or heating systems, can also
If two or more insurers will not issue you a homeowner’s policy, there are options. Check
with your real estate agent, lender or builder for the names of other companies that write
policies in your area. Ask your current insurance agent or company for assistance.
If the condition of your home is the problem, find out what you can do to remedy the
problem to bring your home to insurable condition. Most states or provinces have
insurance associations that can provide information on insurers in your area as well as
helpful information on ways to protect your home from damage from fire and water
damage as well as from natural hazards.
Many states have state-run risk pools through which you may be able to purchase
insurance. National or regional insurance associations can inform you of any programs
designed to provide insurance to those who cannot purchase it in the standard market,
such as the FAIR (Fair Access to Insurance Requirements) Plans. These plans usually
cost more and provide less coverage than a typical policy, but provide some protection
for those who would not otherwise be insured.
Keep your credit in check.
When you apply for homeowner’s insurance, insurers do not just consider your home and
neighborhood when determining whether they will insure you and at what price. They
also look at your credit history. A good credit rating can mean lower rates. A bad credit
rating can cause difficulties. Overall, insurance agencies are more interested in how
regularly you pay than in how much you already owe.
If you have been turned down as a credit risk, you should immediately get a copy of your
credit report to make sure that it is accurate. If it contains incorrect information, make
sure that it is corrected and that you receive an updated report. As a general policy, to
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keep your credit status healthy – keep your balances low, pay off debts, MAKE
PAYMENTS ON TIME (90 days late is viewed as much riskier than 60 days late – on
time is best!), don’t open new accounts, re-establish credit responsibly if you have had
problems in the past. Credit counseling agencies can help.
Don’t forget the dog!
Insurers pay out millions of dollars to victims of dog bites. Such a claim can result in a
premium increase or loss of your insurance altogether. Dog bites account for one-third of
all liability claims stemming from homeowner’s insurance policies. Many companies will
exclude a dog from future coverage once a homeowner is sued over a dog bite and some
may drop your policy altogether after such a claim arising from a dog bite.
Most insurance companies issue coverage to dog owners on a case-by-case basis. To
lessen the chance that your dog will bite someone, you should spay or neuter the dog,
socialize it and implement a training program in which the whole family participates.
Make regular visits to the vet to make sure that your dog is in good health. It’s up to
YOU to prevent dog bites.
Protection against loss from floods and other natural disasters.
Depending on where you live, you may need flood insurance. In some areas it is
mandatory. In the U.S. under the Flood Disaster Act of 1973, flood insurance coverage is
mandatory for homes in federally designated high flood risk zones for anyone signing for
a mortgage insured by the federal government. This insurance is also mandatory for a
homeowner to be eligible for some Federal Emergency Management Agency federal
disaster assistance after a presidentially declared major disaster.
Flood insurance is a special policy backed by the federal government with cooperation
from local communities and private insurance companies. The basic policy covers your
home’s foundation, flooring and walls. Separate content insurance is available but not
mandatory. You can also purchase flood insurance if you are not in a high flood risk zone
if your community is a member of the national Flood Insurance Program.
Participating communities can work together to reduce insurance rates by 5 to 45% by
installing approved dikes, dams, berms and other major flood abatement structures or
paying to have the flood maps and elevations of the region re-evaluated.
Flood insurance is a sensible option for those in high, moderate and even in some low
risk areas. Industry statistics indicate that one in three claims paid out for flood damage
comes from low and moderate risk zones. Statistics show that flooding is 26 times more
likely to occur than a fire over the course of a typical 30-year mortgage. Protect yourself!
Mold – a silent and hidden danger.
Black, furry, wet and slimy, that’s mold and it has cost insurance companies plenty in
recent years. Damage from mold is specifically excluded from the standard homeowner’s
policy. Mold damage is only covered if it is the result of a covered peril such as a burst
pipe that results in water damage. Recent multi-million dollar court judgements against
insurers over mold claims have resulted in companies’ adding restrictions and increasing
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Mold is produced by several types of fungus as they feed on and destroy organic matter.
It feeds and breeds when moisture, temperature and lighting levels are favorable. Mold
itself is a health problem. It is also a symptom of a water problem in your home – a leaky
roof, façade issues, excess humidity or faulty heating or air conditioning systems. Mold
could be the result of a lack of ventilation to remove moisture or poor plumbing.
If you are purchasing a home make sure you check for mold. As an owner, make
moisture checks a part of your regular maintenance. Pay attention to weather patterns,
excessive humidity, ventilation problems and maintain your heating and plumbing
systems. At the first sign of mold get professional assistance to investigate the source of
the problem and to correct it.
The better informed you are the better protected you are. Not having enough coverage or
the right coverage can mean financial ruin and unnecessary hardship for you and your
family. As with any other major purchase it is the buyer’s responsibility to make sure that
the product is right. Find and stick with an insurance company or broker with a proven
reputation for quality of coverage and service. Don’t take anything for granted. Find out
precisely what your policy covers and what special coverage is appropriate for your
region, your home and your family. While there are certain basic components of any
homeowner’s policy; every family is different and every family’s needs change over