Buying A Home? What You Need To Know About Homeowners Insurance
Our last Bearingstar Insurance blog addressed some of the most important things that a homeowner should know about their homeowners insurance if they are selling their home. Now, we want to turn our attention to those of you who are in the process of buying a home.
If this is your first time going through the buying process, we know that you are likely getting a Home Buying 101 lesson every day. You’re probably receiving valuable, but overwhelming, bits of information from your lender on the ins-and-outs of mortgages, guidance from your real estate agent on the extensive steps of the home buying process, and, of course, advice from friends and family on how to avoid the same pitfalls they did when buying a home.
Despite the steep learning curve many of us go through as a home buyer, it’s all worth it when you finally find that one special home that meets all your criteria and your budget, that passes the inspection process, and that mom and dad and your best pals approve of.
Then, the real “fun” of homeownership begins, like changing AC/furnace filters, repairing running toilets, installing smoke and carbon monoxide detectors, cleaning gutters and downspouts, figuring out how to hang pictures and heavy objects properly and then repairing drywall holes when you don’t … well, we think you get the idea.
You are going to put a lot of work and love into your home over the next several years, or maybe decades, that you and your family live there. A home is not just a financial investment, but also a commitment of time, energy, and emotion. So, it’s critical that you are also educated on how you should protect this valuable, and very personal, asset. That’s why your local Bearingstar Insurance team has put together this blog on what you need to know, specifically as a home buyer, about Homeowners Insurance.
When A Home Buyer Should Think About Getting A Homeowners Insurance Policy
If you are actively seeking to buy a home, then you’ve most likely checked off the first few important steps in the home buying process, which are:
- Doing your research on the Web as well as in newspapers and magazines that have real estate listings
- Figuring out how much house you can afford based on your own financial situation
- Getting prequalified for a loan via a mortgage broker
- Finding a knowledgeable and experienced real estate agent
- Discussing your plans with your insurance agent
Oh, what’s that you say? You skipped right over #5 and went straight to open houses and making offers? Bearingstar would like to remind you that, should an offer be accepted, you will have a fairly short window to accomplish many of your required, final buyer tasks – like delivering proof of homeowners insurance – before any sale is approved. Thus, we recommend you contact your Bearingstar agent today to let us know where you are in the buying process. That way, when you find the right home and negotiate a fair price, your insurance partner will be primed to help you complete one of the most critical remaining steps that will be left in the home buying process.
A Correct Valuation of Your Future Home and Personal Possessions is of Utmost Importance
When you reach an initial agreement with a seller on your future home, it’s another important juncture in the home buying when you should contact your insurance agent. At Bearingstar, we see this conversation as having two primary objectives: getting to know you better and asking all the questions we have about your future home.
Next, Bearingstar will need to evaluate the condition and location of all the structures of your intended house, including the foundation, a swimming pool, a sump pump, an oil tank, and so much more. In addition, we will gather other important information about your home and property such as square footage, the type of heating and plumbing used, the age of the house, and the landscaping. This may be done over the phone, by email or in person depending on your needs.
Finally, in order to get the most accurate valuation, we need to understand the extent of your personal property, whether it’s kept in your home or stored off-premises. Our insurance professionals will get an accounting of any furniture, clothes, sports equipment and other personal items that you want covered in case of theft, fire, hurricane or any other insured disaster. Also, the appraised value of your most expensive items, such as jewelry, furs, and fine art, will need to be reviewed and most likely scheduled separately onto your home insurance.
As you can see, it’s essential for your insurance agent to consider everything inside and outside of your potential home in order to ensure that the valuation for your new home is spot-on. Thus, there is nothing more important than working with experts who can correctly value your home and possessions. If the value is not quoted correctly, and you ever have a loss, then, unfortunately, you could really have a serious problem getting the reimbursement you truly deserve for your assets.
How Your Homeowners Insurance Premium Is Determined
The next step your insurance agent takes is to use all the information that’s been collected about your future home and your personal belongings and calculate your home valuation and get a homeowners insurance quote. This is a huge milestone in not only the insurance process, but also your overall home buying journey. At this point, it’s beneficial for you and your insurance agent to go through all the policy details so that you can feel confident that everything has been quoted correctly before you approve it.
It’s quite understandable that the first place your eyes might go to is the bottom line – the insurance premium – and that your first question is most likely going to be about how this cost was determined. That’s why your Bearingstar agent will take the time to thoroughly explain the Dwelling Coverage portion of your homeowners insurance policy. This coverage, found in Section A of your policy, establishes the limit for which your home is valued and insured and is the basis for the valuation of all other components of your insurance. See why it’s so critical that you really understand this section?
The best way to describe what “dwelling” refers to is to have you imagine your house being completely tipped upside down. After lots of stuff falls out, primarily all your personal possessions, you will be left with just your dwelling and this is what is valued and insured in Section A/Dwelling Coverage of your homeowners insurance policy.
After the Dwelling Coverage is established, the other sections of your homeowners insurance are calculated using a standard % of Dwelling. For example, Personal Property ranges from about 50 to 70% of the insurance on the structure of your home, while Additional Living Expenses or Loss Of Use typically equals 20% of the amount your dwelling is insured for.
We know that all of this can quickly become overwhelming. That is why, at Bearingstar, we choose to take a collaborative approach to helping you with your home insurance needs. We don’t tell you what you should do; instead, we walk you step-by-step through your policy so that you can ask us questions along the way and we can take the time to answer them thoroughly.
A Summary of Your Standard Homeowners Insurance Coverage
Whether you are a new home buyer or a seasoned one, we strongly believe that it’s always worth taking the time to thoroughly review your home insurance coverage as you get ready to purchase a new place. At Bearingstar, our goal is to help you clearly understand what is covered in a standard homeowners policy and, maybe more importantly, what is not, and then to help you cover any gaps in protection as well.
What’s Typically Covered
Most standard homeowners include 5 essential types of coverages:
- For The Structure Of Your Home,
- For Other Structures & Outbuildings
- For Your Personal Belongings, including items stored off-premises, all over the world
- Liability Protection, including no-fault medical coverage
- Additional Living Expenses, including reimbursing rent that you would have collected from a tenant if your home had not been destroyed
What’s Typically Not Covered
Many homeowners think their policy will cover events that it probably does not:
- Damage done by a contractor while renovating your home
- Termite Infestation
- Damage caused by war or nuclear hazard
Did some, or maybe all, of the coverage exclusions come as a surprise? Imagine if you only discovered these gaps in your insurance after experiencing a catastrophe. At that point, it would be too late to realize that your insurance agent should have informed you of these risks from the beginning.
Remember, as the homeowner, you also have a responsibility to ensure that a claim will be covered. You must provide completely accurate information to your insurance agent and/or on your insurance application because any misleading information could result in a future claim not being covered.
Your Bearingstar agent is committed to spending the time to go through every coverage in your homeowners policy and what it means. Plus, we will point out where you may need additional insurance options not available in the standard homeowners insurance policy. This may not sound like the most exciting way to spend a free moment of your day; however, we truly believe this is an essential part of being a responsible homeowner and can ensure that your home, your possessions and your loved ones are well-protected in case of a loss.
Additional Coverage Options You May Want To Consider
Your local Bearingstar agent will help you identify the enhanced insurance options you may need for your special home and belongings
- Expansion of coverage limits for mold claims
- Home Systems & Service Lines Protection Coverage (available to Massachusetts homeowners)
- Separate Flood Insurance
- Scheduled Jewelry/Fine Art/Other Special Property Insurance Rider
- Personal Umbrella Insurance
- Identity Fraud Expense Coverage
At Bearingstar Insurance, we do think that what you don’t know, can hurt you. This could not be truer than as it relates to your homeowners coverage. It doesn’t matter if you are a longtime homeowner or a new home buyer, lacking knowledge about your homeowners insurance policy, especially any coverage gaps, is simply too much of a risk for you to take when so many unexpected things can happen.
Bearingstar Insurance Wants to Be Part of the Team Helping You Buy a Home
We understand how much time and effort it takes to find the right home and successfully close the deal, not to mention the responsibility that now rests on your shoulders to take care of this significant investment. With a Bearingstar insurance advisor by your side during the home buying process and throughout all your years of homeownership, you will always have a partner to help you with your insurance-related concerns and questions.
After your home insurance is purchased and you close on your new home, Bearingstar will continue to develop a relationship with you. As our valued client, you can expect to hear from us periodically throughout the year with newsworthy and educational information, insurance-related and beyond. We also strongly encourage you to stay in touch with us and let us know of any changes you make to your home. In fact, any type of renovation can significantly impact the value of your home and, as we’ve emphasized throughout this blog, it’s critical that your house is valued correctly in case you ever experience a loss.
As you move from buying your first home to purchasing your dream place, to having a vacation house, and, eventually, to a getting a comfortable retirement abode, your local Bearingstar Insurance professionals will be there every step of the way offering thoughtful advice. Contact a friendly agent near you at any one of our many convenient locations across Massachusetts and Connecticut. We look forward to sharing everything you need to know about homeowners insurance, but may have been afraid to ask!