Getting a new house is the quintessential American dream. However, buying a home isn’t an easy option for most Americans. Most of us simply don’t have enough money saved to just buy a home. That’s why for most Americans buying their own home means taking out a mortgage. One of the requirements for mortgage applications is getting home insurance. The home insurance not only protects you but also your lender, in case of any damage or loss to the property.
What’s Home Insurance?
Home Insurance is the insurance you take out on your home to cover from four kinds of damage to the property. This includes interior and exterior damage, any damage of personal belonging and any injury that occurs in relation to the property.
What You Need to Know Before You Get Home Insurance
Buying a home can be both the happiest phase of your life and the most stressful one. There are so many decisions to make. One of them is to buy a reliable home insurance policy. Here are some things you should be considering them buying home insurance:
What Does Home Insurance Cover?
That’s the most important question. Most people assume that opting for the lowest insurance policy is a smart decision. I’ll tell you what. It’s not.
Even if you are buying a brand new home, there’s going to damages and loss. With home insurance, you don’t have to bleed money when that happens. Choose a cover that offers the best value for the price.
There are two types of cover- a building insurance cover and a content cover.
A building insurance covers any damage that might occur as a result of a natural disaster such as fire, storms, floods, vandalism etc.
You can also extend your home insurance policy to cover your personal home belonging. That’s called a content cover. This will include insurance cover for all valuables and jewelry including antiques, collections, and paintings. It covers against damage occurring as a result of theft, fire, flood, earthquake, and vandalism.
Compare Home Insurance Providers
If you are buying a home on a mortgage, your lender will ask you to get home insurance first. But your lender cannot decide your insurance provider. You would want to do it on your own.
Even if your lender recommender a certain company, we recommend that you compare at least three insurance companies before deciding.
Compare them on the basis of price, coverage and customer reviews. Start with your friends and family for suggestions. You want to be sure that your insurance provider won’t go into hiding when you go put down a claim.
Deductibles are the amount of money you’ll be paying out of your pocket in case of any damage. Most home insurance policies don’t pay for all the damage to your property. They pay a certain percentage of the damage and the rest you will have to arrange on your own. The higher the insurance premium, the lower will be your deductibles.
Home Insurance payments, in case of damage, can be made in two ways. You can either choose to get cash value for your belonging. Or you can also ask your home insurance to replace the damaged part for a new one.
If you opt for a replacement, it will cost you a higher insurance premium. That’s because, with a cash payment, the insurance company will assess the value of the belonging in the present time. You won’t be paid the entire cash value of the product that you bought it for. They will deduct the depreciation value from the product. Depending on how old the product was, the cash value can go very low.
A replacement will be less stressful for you and easier to handle also.
No Claims Discount
Many insurance companies offer a no claims discount. If you haven’t made any insurance claims for a particular year, then with a no-claims discount, you can ask your insurance provider to lower your monthly premium for the next year.
Escrow Your Home Insurance Payments
It makes your lender very happy when you escrow your home insurance payments, along with your mortgage payment. This ensures that you will be paying your home insurance yearly on time. Otherwise, it would look bad on your credit score and your credibility as a borrower.
No one plans on missing their home insurance or any insurance payments. But it happens more often than we think. It could be because of a family emergency, lack of funds or simply because you forgot to pay. Most home insurance companies offer a grace period. This grace period varies with every company, but it’s mostly 10 days after a delay in payment. Find out your grace period and the policy against late payments. This guide will help you deal with late payments like a pro.