4 Things to Know about Homeowners’ Insurance

Even if your lender hasn’t specifically stated that you need to take out a homeowners’ insurance policy—and they probably will—it’s not something that you should go without. Like any type of insurance, it might seem like just another monthly cost—until something goes awry, that is.

But you also don’t want to get stuck with the wrong plan or a frustrating and unhelpful insurance agency. What follows are some of the most important things to consider before deciding on a policy.

Educate Yourself and Compare Your Options

insurance photo
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When it comes to taking out a homeowners’ insurance policy, you want to learn as much as you can about what’s available, who’s offering it, and at what price. It’s typical for mortgage lenders to require the home buyer to purchase insurance, and they may even specify the minimum type of coverage needed, but they likely won’t tell you who to purchase it from.

Before making a decision, due diligence means not just understanding the ins-and-outs of premiums, deductibles, and sub-limits, but also comparison shopping between different insurance companies. To track down a company that offers competitive rates and excellent customer service, friends and experienced customers (including on the Internet) are your best allies.

Pay Your Mortgage and Insurance Together

In most cases, setting up escrow payments will allow you to almost seamlessly combine your monthly premiums paid to the insurance company with your mortgage payments. Merging these payments provides two distinct advantages. First, it streamlines the process, making it less likely that you’ll be late on either payment. Second, it allows for peace of mind between yourself and the lender, since they can clearly see that you’re maintaining your insurance policy.

Know Your Home Value

It’s essential that you know the exact value of your home before taking out a policy. Your monthly premiums are directly correlated to your home’s value, which means you could be overpaying if the property has been overvalued. However, in case something happens to your home and you need to make a claim, you don’t want to find out the property’s been undervalued, either.

Of course, if you’re purchasing insurance at the same time at closing, this step becomes much easier—but you’ll still need to consider whether you’re listing the value with or without depreciation, and whether you’re factoring in the valuables and belongings inside.

Save Money Where You Can

With most insurance companies, you can reduce your monthly premiums by proving that you’ve taken certain steps to reduce the likelihood of a claim. Some of the more obvious possibilities including installing a home security system, or upgrading to a more secure combination of locks and deadbolts. However, other factors may be considered as well, including the quality of your electrical work—even your proximity to police and fire stations.

There’s a balance you’re looking to strike here—you want the best coverage you can afford, but you don’t want to overpay. Always keep in mind that while a plan with lower premiums may look great today, it will seem less appealing if the unthinkable occurs years down the road.

 

Phil Ganz (354 Posts)

Philip D. Ganz is a Boston Mortgage Broker and Boston Home Loan specialist. For information, expertise, consulting, or advice about home loans, refinancing mortgages, or commercial property loans, contact Phil with no obligation: 617-529-9317


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