31% of all homebuyers in the United States were first-time homeowners in 2020. However, in a survey by Realtor.com with 3000 American respondents, 44% of homeowners did not have a clear understanding of the things to look for in a home insurance policy. Out of these, 15% had absolutely no idea of the contents of a home insurance policy. The younger generation of home buyers and first-time homeowners are taking an unacceptable risk if these stats are truly representative.
Obviously, it is essential to take all the appropriate factors into account while picking a home insurance policy.
Right amount of coverage
It is possible to customize the home insurance policy specific to the needs and risks. However, it is essential to evaluate the risks to define the proper coverage. Here are some of the important aspects for first-time homeowners to understand the coverage requirements.
- Evaluation of local costs to repair the damage, like the cost of repairs and replacements. The costs of material and labor are not uniform across the United States. Homeowners must, therefore, research these aspects.
- Homeowners must obviously also evaluate the cost of their personal property. They should define the cost of their personal belongings. It is not necessary to understand the exact cost. A rough estimate of the personal property is; however, essential to determine the coverage needs.
- As an aside, it is also relevant to check if the new home is in line with the local building codes. If this is not the case, significant time and effort may go into bringing the home in compliance with the applicable codes while repairs are undertaken.
- In case of damage, the homeowners may have to temporarily live elsewhere while waiting for repairs to be completed. It is advisable to determine the local living costs to understand the need for additional living expenses.
- Liability coverage depends on several additional factors. For example, it increases if the house has pets or a pool. The evaluation in this aspect is also necessary to cover all the potential contributing factors.
Cost of coverage
It’s understandable that the most significant aspect while buying a home insurance policy is the cost of home insurance. There are several factors that may cause variations in these insurance premium costs for homes.
Location, for instance, can play a huge role in the cost of home insurance coverage. Different rates apply depending on federal, state, town, or other jurisdictions. Obviously, home costs vary across regions and that reflects in the premium too. Home value directly affects home insurance costs. In fact, the cost of the home is directly proportional to the cost of home insurance. Other factors that can impact costs include additional coverage options, claims history, and personal information.
Homeowners must also carefully evaluate the deductible for their home insurance policy. This is the lump sum amount they must pay before the insurance company pays for the remaining amount. A higher deductible can bring down the insurance rates; however, it also means paying more when one needs to file a claim.
Conditions change from location to location. For instance, some places have a higher propensity for extreme weather conditions that can cause damage to the house.
Homeowners need to factor in the probability of such location-specific risks while taking up their home insurance.
Tornadoes and hurricanes are the primary cause of concern for homeowners in many US states. This hits insurance premium costs too. In locations like Texas, Kansas, Nebraska, etc., homeowners need to allow for additional deductibles for potential wind damages. Further north, the extreme cold is another concern that may lead to massive damages to the house. Based on the area, homeowners need to allow for coverage from snow damage in the insurance policy. Similarly, certain locations are more prone to floods, hurricanes, and earthquakes. The coverage options in the home insurance policy need to consider such probabilities.
It’s useful to apply for the home insurance policy early on. Some additional tips for first-time homeowners are:
- First-time homeowners have several misconceptions about the coverage needs. They often believe that the insurance must cover the home’s market value. However, it may be better to look for the replacement cost of the home. This cost refers to the amount spent on re-building the home at present-day labor and construction costs.
- It can sometimes be beneficial to bundle home and auto insurance as one unit. It provides better discounts to the policyholders and adds convenience to the payments. First-time homeowners can maximize savings by availing multiple insurance options from the same insurance agency.
To Sum it Up
First-time homeowners are bound to have a series of questions and doubts regarding their home insurance policy. While discussing the terms with the insurance agents, homeowners must discuss the coverage, costs, deductibles, additional benefits, and bundled insurance options. Of course, they must also do their own research on these aspects along with the location-specific risks to ensure maximum security and savings.