Buying a new home can be a big step for any family. It can seem even bigger if you have never purchased a home before. Therefore in this article I will share with you several new home buyer insurance tips. The good news is, your realtor and your mortgage representative will guide you through the process. At some point you will be instructed to provide your mortgage team with a copy of your home insurance.
Generally insurance documentation is not needed until the end of the mortgage process but that does not mean you should wait until the very end of the mortgage process to shop for your home insurance coverage. Don’t make the same mistake I made when I purchased my first home. I waited until the last possible moment to get my home insurance. While going through the insurance application process, a couple of underwriting questions came up and I needed to obtain documentation on some repairs that had been done to the house. The people I was buying the home from did not keep great records and we had to scramble to gather that information from the contractors that performed the work. That delay nearly pushed my closing date back and put the process in jeopardy.
Luckily I was able to get the information I needed and the insurance policy was approved in time. The loan closed but it was very stressful to say the least. To help you avoid the same mistakes I made, I reached out to our friends at Armed Forces Insurance (AFI). AFI has been dedicated to providing insurance education and insurance solutions to military families for over 130 years. I asked them for some helpful information on what you need to know when obtaining home insurance for your new home purchase.
Your lending team will let you know when it is time to submit your insurance certificate to them, but that does not mean you have to wait until then to start shopping for your new policy. A good rule of thumb is to start shopping at least a month out from your closing date. However, it is not a bad idea to start shopping for home insurance the minute you find a home. This will give you enough time to find the right insurance company and answer any underwriting concerns there may be.
Get Multiple Quotes
Don’t just assume the insurance carrier you are currently with where you are living now will have just as good of rates as where you are moving to. Even changing zip codes in the same city can drastically change pricing. Obtain quotes from at least three carriers to help ensure you are getting the best deal.
Understand Your Deductibles
When purchasing insurance it is important to understand what your deductible will be on your new policy and how it will apply to you. Simply, a deductible is the amount of money you have to pay if there is a claim. A deductible is not always a set dollar amount and may not be the same depending on the type of claim you may have.
There are some locations in the US where your deductible can be as low as $500 for all claims, though a $1,000 is more the industry average. However If you live in a coastal state or a state that experiences a lot of storm damage, your insurance company may require that you have a percentage deductible for storm related claims. For example, if you have a home insured at $300,000, and you have a 2% wind/hail/hurricane deductible, that means your responsibility for any storm claim would be $6,000.
Know What your Policy Covers
A Home insurance policies does not just protect your home, but your policy covers many other items such as:
- Dwelling Coverage – Coverage for the home itself.
- Other Structures – Coverage for structures not attached to your home but on your property such as sheds, detached garages, and fences.
- Personal Property – This is almost everything that will be moved into your home from your moving truck. There are some limitations on certain items so ask your agent what those are.
- Extra living expense – Money to be used in case you are forced from your home due to a claim and have to live elsewhere temporarily.
- Liability and Medical Payments – Coverage for medical expense and property damage caused by household members to others.
- Other Endorsements – Other coverages that can be added to enhance the protection offered by your homeowner policy. Some important ones are:
- Water Backup/Sump Pump Overflow
- Extended Replacement Coverage
- Ordinance/Law Coverage
- Loss Assessment (especially if you are buying a condo/townhome)
- Personal Injury Coverage
- Equipment Breakdown
- Service Line Protection
- Foundation Coverage (TX)
- Water Damage (TX)
More Importantly, Know What Your Policy Does Not Cover
A Homeowner insurance policy will cover many things that could happen to your home, but not everything. Each policy has a list of exclusions for claims that could occur to your home. Make sure you are aware of what those are. The most common exclusions on a home insurance policy are:
- Wear and Tear
If you live in an area that is prone to earthquakes or flooding, you will want to discuss your options with your insurance agent. There are often separate policies or endorsements that can cover these claims for an additional charge.
What To Do Once You Have Selected a Policy
Have your insurance agent reach out to your lender. Your lender will provide your agent with all the necessary mortgage information and documentation they will need for your mortgage file.
Now that you have selected your insurance policy and your agent has gotten the final pieces of information over to your lender, all that is left to do is to sit back and wait to close on your home. Then the real fun begins….Moving.
Best of luck with your new purchase. Choosing the right team to help you with real estate, lending, and insurance can make all the difference.
Those are just a few tips from Armed Forces Insurance on what to know about obtaining home insurance. With a little bit of homework and the right agent, purchasing the correct home insurance policy can be very simple to do.
For a more tools and resources on home insurance and other insurance products, head over to Armed Forces Insurance – Resources and Tools page to learn more.
Happy home purchasing!
About Armed Forces Insurance (AFI)
As a military family, you need insurance that matches your needs and protects what you value most. You deserve an insurance company that is committed to serving you. MilHousing Network is proud to partner with Armed Forces Insurance to bring military families reliable homeowner’s insurance options when buying a home. Contact them today at 800-313-1936 or visit www.afi.org/milhousing to learn how they can support your unique military lifestyle.