Essential Insurance Tips for First-Time Homeowners

By Jeanene Dunn

Homeowners insurance protects your property and belongings from damage or loss caused by events like fire, theft or natural disasters. The policy also covers liability if someone gets injured on your property. Understanding your policy details can help you protect your investment more effectively. Key points include:

• Property Protection: Covers the structure of your home and personal belongings.
• Liability Coverage: Offers financial protection if someone suffers an injury on your property.
• Additional Living Expenses: Helps pay for temporary housing if your home becomes uninhabitable.

How Escrow Works

Mortgage lenders create an escrow account to manage payments for insurance premiums and property taxes. When you purchase a home, your monthly mortgage payment deposits funds into this account. The escrow agent then uses these funds to pay those bills. This system helps avoid:

• Coverage Gaps: Ensures continuous insurance protection.
• Late Payments: Prevents penalties or possible policy cancellation associated with overdue bills.

How to Choose the Right Policy

To choose the best homeowners insurance policy, follow these steps:

• Compare Quotes: Shop around with multiple providers to secure competitive rates.
• Review Policy Details: Check coverage limits, deductibles, and exclusions to ensure complete protection.
• Customize Your Coverage: Add endorsements or riders to safeguard high-value items or address unique risks. At renewal time, review your policy to ensure that all information is up to date and make changes, if needed.

Differences in Insurance When Building vs. Buying an Existing Home

Your insurance needs change based on whether you build or buy a home:

• Building a Home:
  • Builders risk insurance Initially covers construction materials and the structure during the building phase.
  • Requires updating the policy once the home is complete to include full coverage.
• Buying an Existing Home:
  • Provides coverage for an already established structure and its immediate risks. Factors that may impact your premium payment include the home’s age, value, location and the claims history.

Insurance industry expert, Jack Baker with Bovard Insurance explained that insurance companies subscribe to claims services that enables agents and brokers to research the claims history on an home or lot.

Consult Your Insurance Professional

Your insurance agent is an excellent resource to get more detailed guidance. They will work with you to identify cost savings opportunities and tailor coverage to meet your specific needs. Other helpful industry professionals include:

• Mortgage Brokers: Offer counsel on how insurance integrates with your loan terms.
• Financial Advisors: Provide advice on how insurance fits within your overall financial plan.

These experts can answer your questions and provide the insights you need to secure your investment.