Homeowner Insurance Primer for You

Homeowner Insurance – In Appreciation for First-Time Homebuyers

Home ownership is part of the American Dream, and it needs to be protected by homeowner insurance. It’s a sign of financial success and stability. It says that you have control over your destiny. And at GoPrime Mortgage, Inc. . (dba PrimeRate Mortgage Lending), Zachery “Zack” Adam and his team work hard to make this dream a reality for many first-time homebuyers.

Buying your house for the first time can be a great source of satisfaction, gratitude and fulfillment. But it can also be a source of anxiety, stress and uncertainty. But the day you close on your mortgage and accept the keys to your first house can make all that worry worthwhile. So, to all of you first-time homebuyers who’ve become trusted clients and happy homeowners, here’s a big Thank You.

Prime Mortgage Lending Gives Back

Zack wants to show you how much you’re appreciated. To that end, your friends at Prime Mortgage Lending of West Asheville offer you this free primer on homeowner insurance. Here’s some advice to help you move through the maze of options. While Zack’s always available to answer questions and provide suggestions, you’re the one who must choose what’s best for you.

When it comes to homeowner insurance, it’s common to feel under-protected and outgunned, especially when it’s your first house. There’s a lot to think about. Your feelings of uncertainty are one of many reasons for purchasing the right homeowner insurance — to ensure you’re protected.

The Basics

Welcome to the ranks of homeownership. You should know by your closing whether your home is insurable. While most people assume that they can get homeowner insurance, insurance companies may pass if your house teeters on a cliff, for example, or sits directly on an active fault line. It’s up to you to make sure insurance is available.

Once that’s done, you can enjoy the experience of homeownership, knowing that your investment is safe and secure, backed by a quality homeowner insurance policy. Before you start comparing policies, however, it’s important that you know how to measure premiums and deductibles.

• Premiums vary greatly depending on multiple factors including the value of your home, the type of coverage you opt for, and the personal possessions inside.
• A deductible is the amount you pay before your insurance company pays the balance. When a policy has a high deductible, it usually means lower annual premiums.

Got that? Now, there are the four basic types of coverage that standard homeowner insurance policies provide:

1. Structural coverage — covering the structure of your home
2. Personal property coverage — covering your belongings
3. Liability protection — covering accidents in your home
4. Loss of use protection — covering relocation and living expenses due to an insured disaster

Structural Coverage

Homeowner insurance policies pay to repair or reconstruct homes that are damaged or destroyed by earthquake, fire, lightning, rain or other disasters mentioned in your policy. Look for whether your policy states “Named Perils” or “Open Perils.” Policies with Named Perils only cover damage from those specified disasters.

Flood damage is never covered by a regular policy. You can purchase it separately, and it may not even be that expensive if your home is in a low-risk zone. Only 23 percent of all flood claims come from low-risk zones.

If you have a detached garage, tool shed or gazebo, most policies cover it for about ten percent of the structural insurance you have on your home. If it’s important to you, make sure you add this additional coverage. Otherwise, don’t bother.

For peace of mind, remember this simple guideline when purchasing homeowner insurance for structural coverage: Purchase a plan that completely covers the cost to rebuild your home, including the cost of debris removal. This amount may be more or less than the price you paid for the house.

Personal Property Coverage

Typically, damage to plants, trees and shrubs aren’t covered unless they damage your home. You can insure them on a standard homeowner insurance, up to about $500 per plant. While they aren’t covered for wind damage, some insurance companies will pay to have a felled tree removed if due to hail or the weight of ice, snow or sleet.

Personal belongings like jewelry, art, furniture and electronics are covered if they are stolen or destroyed by a disaster like a hurricane, water damage, wind or fire. Personal property coverage also includes items that aren’t on your premises, up to a certain limit. This means your belongings are covered anywhere in the world.

You also can purchase extra coverage to protect your belongings. Called a rider or floater, this coverage typically costs about 50 to 70 percent of the replacement cost of your home. For expensive items, there are dollar limits if they’re stolen. To make sure your things are fully covered, have them appraised and put them on a Personal Articles Floater. You also can purchase extra coverage for the unauthorized use of your credit cards.

Liability Protection

Liability protection covers you and your family against lawsuits for property or bodily damage to other people. Liability protection also covers injury caused by pets. For example, if your dog bites your neighbor, you’re covered. If the dog bites you, however, you’re not covered, at least not by your homeowner insurance. Since dog bites account for a third of all liability claims, some insurance companies keep lists of dog breeds they don’t insure.

Liability coverage also provides no-fault medical coverage, which covers you in case someone is injured during a visit. As in the case with dog bites, your homeowner insurance doesn’t cover medical bills of your own family unless you pay extra for it. The liability portion of your policy also pays the costs of both defending you in court and any court awards you may lose, up to the limit of your policy.

Most liability limits start around $300k. If you feel you need more coverage, talk to your insurance agent. It’s often inexpensive to increase the limit to $500k. Additionally, you can purchase an umbrella policy to expand your coverage to include claims against you for things like slander. Most first-time homeowners don’t need more liability than the minimum, but review your liability limit every year.

Loss of Use Protection

You can incur additional living expenses if you’re unable to live in your house because of an insured disaster. Loss of Use insurance covers the cost of hotel bills and restaurant expenses incurred while your home is rebuilt. This coverage is separate from the coverage of repairing or rebuilding your home.

While this coverage has limits, including a time limit, you can increase it for an additional premium. If you sublease part of your property, Loss of Use also covers the part of your house that you rent out, including the amount you would have collected from a tenant had your house not been damaged.

Different policies offer different levels of coverage. Some policies, for example, cover your mortgage payment if you’re displaced because of a covered claim. Others spell out endorsements such as water backup, Open Perils (better than Named Perils), longer limits and guaranteed replacement. Make sure you get everything you need on your policy by asking “What if” questions.

Finding the Right Homeowner Insurance Company

To find the right homeowner insurance company for you, look for an insurance agent you can trust. Your agent is the intermediary between you and the insurance company. Interview several to find the one who seems honest, provides good advice and looks out for your best interests. Having a great agent who knows how to write a good policy can make all the difference. Consider these variables:

• Policy coverage
• Industry ratings
• Costs
• Claims service
• Customer service

Industry ratings are provided by companies like A.M. Best. These companies rate customer service, price and policy, financial strength and claims service. The minimum for a high rating is A–. If an insurance company has a lower rating, beware.

Cost considerations involve variable prices for deductibles, premiums and discounts. Choose the highest deductible you can afford. And be careful about filing too many claims. Some companies may raise your annual premium substantially if you have two or more claims within a three-year period. Others won’t renew your policy, even if you filed small, inexpensive claims. This is another question to ask your agent.

As a first-time homeowner, the price of your policy may be an overriding factor, but don’t end up with inadequate insurance. If you shop around, you’ll find that some homeowner insurance companies offer discounts on premiums and deductibles for:

• Buying a home that’s located in an established neighborhood near a fire station
• Making certain your home’s near a fire hydrant
• Buying a home with an updated roof — and electrical, heating and plumbing systems
• Bundling your home and auto insurance
• Using a security service for fire and burglary protection
• Not having any claims for a specified amount of time

Thanks Again

Now that you have the basics of insurance for your new home, you can better make wise decisions. Armed with the right type and amount of insurance on your first home, you can move in with less stress and more confidence that you’ve made the right decision. You can plan for the added cost of homeowner insurance and know exactly what you’re getting for your money.

Owning your first home is still an important part of the American Dream. Zack and his team at Prime Mortgage Lending of West Asheville value your business. If you really need help, talk to Zack. If he can’t help you, he can point you to someone who can. Because that’s what friends do.