Your home is probably your single greatest asset, so you’ll want to have it properly insured. Expect to present a lot of paperwork to the insurer and to make a number of decisions concerning your level of coverage. If you’re prepared, you’ll be able to select the best policy for your home.
All insurers will require you to fill out a questionnaire with personal data and information about the home. Before purchasing a new home, get the seller, the seller’s real estate agent or a condominium building manager to help answer the questions. The insurer will want to know when the building was constructed, how old the roof is and what material it is made of, the type of electrical wiring, the type of heating system, the age of the plumbing and similar information.
Factors Affecting Your Premium
The application questionnaire helps the insurer assess risk factors. The higher the risk, the higher the premium will be. Old wiring and old roofs are fire hazards that increase the premium. Brick or masonry construction is less of a fire hazard than wood frame and results in a lower premium. If you own a two-family home or rent out space in your home, you’ll need increased liability coverage. Swimming pools and hot tubs, especially if not fenced in, increase liability coverage. Prior claims for losses will also increase the premium. A high deductible and alarm systems lower your premium.
Don’t be surprised if an insurer comes back and requires you to make repairs to your home, even if you’ve had your policy with the same insurer for years. The insurer may tell you to repair a loose railing, add a smoke detector or replace old wiring. You’ll have a grace period to comply, but if you fail to make the required repairs, your policy may be canceled.
Don’t expect some of your most prized possessions to be covered under a standard policy. That beautiful diamond engagement ring, your favorite antique vase and your man-toy electronics collection may all require riders. Riders are additional mini-policies that cover specific items. Your standard policy covers some items but imposes a low dollar limit on jewelry, electronics and equipment, collectibles and similar items.
Special Hazard Insurance
Earthquake damage, hurricane damage and flood insurance are not usually covered by a standard policy. Some policies also exclude mold remediation. Find out whether you might need additional, special policies in advance so you won't face an unpleasant surprise if you later discover that you’re underinsured when disaster strikes.
You can shop around with different insurers for quotes and look for the best deal. An insurance agent should easily be able to submit applications to multiple insurers to find you the best policy. If you buy a policy from the same company that insures your car, you should qualify for a multiple-policy discount.
Paying your entire premium in one lump sum should trigger a small discount. Otherwise, payments can be made monthly throughout the year. Some mortgages require that insurance payments be made to the lender, and the lender then pays the insurance company. Even if you make your own insurance payments, your lender will ask for a copy of your policy.
- Rocky Mountain Insurance Information Association: Homeowner's Insurance Policy Basics
- Brigham Young University-Marriott School: Basics of Homeowners Insurance
- State of New Jersey: Homeowner’s Insurance Frequently Asked Questions
- Floodsmart.gov: Residential Coverage Overview
- California Earthquake Authority: Homeowner Policies
Annabella Gualdoni has written newsletters and reports for corporations and nonprofits since 1994. She is a real estate professional and also teaches subjects including international cooking and travel, dating/relationships and personal finance. Gualdoni has a Bachelor of Arts in international development from University of California, Berkeley, a Master of Arts in international relations from Boston University, and a Juris Doctor from Boston College Law School.