Insurance Tips to Know Before Purchasing Your New Home

Insurance Tips to Know Before Purchasing Your New Home

(If you’re looking to purchase a home, RiskBlock has provided consumers with a free ebook [ADD LINK TO “RiskBlock Ebook”] that can guide you step-by-step through the process, including tips from realtors, attorneys, lenders, and RiskBlock insurers.)

While looking for your dream house, there’s probably a dozen things on your mind: property taxes, school district, the amount of recreation in your potential home’s vicinity, and so on. What tends to get overlooked before purchasing your home is insurance.

It may not be glamorous as the in-ground pool you’ve been eyeing, but insurance plays a huge role in determining how efficiently your home-buying process will be, not to mention it may save you money!

In this article, we’ll take a look at a number of tips that you can follow to make your next home purchase worry-free.

Before Hunting for Your Home…

There’s a number of stages of your home buying experience where insurance will come into play.

• First, before you hunt for your house, check your credit score and credit history. Most banks (though not all credit unions) offer free credit scores for their clients. View your credit score and get a copy of your credit history. Both can qualify you for a “good credit discount” on your insurance polices. If your credit (including your spouse’s credit) is not up to par, take the necessary steps to improve it before selecting a home.
• Second, if you’re renting an apartment or a home, consider taking out a renters insurance [ADD LINK TO “Renters Insurance”] While you can enjoy all of the benefits of having the protection against loss, there’s a couple of hidden benefits for potential homeowners:
  • Your policy can protect the down payment that you’re earning to purchase your new home if a catastrophe occurs, [ADD LINK TO “Named vs. Open Perils”] and
  • It can provide an insurance history that can reduce your rates when you later look for homeowners insurance. [ADD LINK TO “What is Homeowners Insurance”]

Actively House Hunting…

While searching for your new home, it is important to consider a few characteristics of the house itself and how they’ll impact your insurance rates. These include:

• size
• location
• construction (including types of materials and architecture)
• condition

Let’s take a look at how these characteristics come into play when determining insurance rates:

Fire Departments

If you’re potential home is near a permanently-staffed and high-rated fire department, your insurance premiums will tend to be lower than normal. This also includes the proximity of a fire hydrant near your home that can minimize response-time and thus damage to your home and property.

Age of the Home

The more modern your home, the better. Old homes may be a site to behold, but they’re also more costly to insure. Those ornate features, which can range from turn-of-the-century iron work to a grandiose chandelier, can be costly to maintain [ADD LINK TO “Insurance is Not a Maintenance Plan”] and replace, raising the cost of your insurance. Also, older utility systems (electric, plumbing, gas, etc) can degrade from age, leading to catastrophes like a sewer main backup [ADD LINK TO “Sewer Main Backup”] overflowing while you’re on vacation! Therefore it is in your best interest to consider upgrading your home’s features as a standard part of maintenance to keep your premiums low.

Near the Coast?

If you’re potential home is located within a certain proximity on or near to the coast, your insurer will typically pass the risk of insuring on to the consumer via higher premiums. In addition, you will likely have to pay a separate hurricane or windstorm deductible should a catastrophe occur.

Another concern for those that live in coastal communities it that insurance might not even be available at all through private insurers. Instead, state-run insurance programs can provide insurance to you, which are typically most costly and provide substantially-less coverage.

Underground Oil Tank

If you own an older home that has an underground oil tank, be aware that many insurers may refuse to insure the property due to the risk and hazard of the device. Consider the cost of upgrading when shopping around for your new home.

Roof Condition

When house hunting, make sure to always check the condition of the roof. New roofs are less likely to cause water damage, and if the roof is made of fire or hail-resistant materials, insurers are likely to give you discounts on your homeowners insurance.

Up to Code?

It is extremely important to find out if your potential house is compliant with your local/state building ordinances. If your potential home isn’t fully up to par, insurance companies may wait to insure you until the home is brought up to code.

Flood Risk

Bear in mind that damage that results from flooding isn’t covered by your homeowners insurance [ADD LINK TO “What is Homeowners Insurance”] policy. Instead, you’ll have to purchase a separate policy for flood insurance [ADD LINK TO “Flood Insurance vs. Water Backup”] if the area is prone to flooding. The NFIP (National Flood Insurance Program) and other specialized insurers offer coverage at high-cost premiums

Earthquake-prone Areas

Similar to flooding, damage caused by earthquakes is NOT covered by your standard homeowners insurance policy. [ADD LINK TO “What is Homeowners Insurance”] If your dream home is located in an earthquake zone, you can purchase insurance by way of an endorsement on your policy. States like California offer state-run insurance like California Earthquake Authority program. Check with the history of the area in relation to the frequency of earthquakes to determine if this endorsement is necessary.

Additional Structures on the Property

If your potential home has a gazebo, barn, swimming pool, or any other special feature to your home, you must be aware that you will be required to purchase more liability insurance. [ADD LINK TO “Liability Insurance”] To supplement this coverage, you may want to purchase an umbrella policy [ADD LINK TO “What is Umbrella Insurance?”] to ensure you’re covered in case of a lawsuit.

Before Bidding on Your Home

Once you’ve settled on a house that you’d like to place a bid on, don’t forget to do a few key things to ensure that your home is insured at reasonable rates:

• Ask for a loss history report on the home from the current homeowner. A loss history report provides a record within five years prior of:
  • the type of losses that have occurred to the home,
  • the date of the loss, and
  • the amount of the claim

Loss history reports can be obtained via CLUE report (Comprehensive Loss Underwriting Exchange, from LexisNexis) or a A-PLUSTM property report from ISO.

By having a loss history report on the home that you’re thinking of purchasing, you can view detailed information that directly pertains to insurance concerns. For instance, if a roof collapsed and caused water damage, it is helpful to know if the damage was adequately repaired—or improved upon. If an improvement occurs (ie. a hail/wind-resistant roof), you can expect your premiums to be discounted.

• It’s standard practice to have the house professionally inspected to get your mortgage approved, but accompanying the inspector for insurance reasons is also a smart course of action. While reviewing the home, make sure the inspector checks the following:
  • the general condition of the home
  • water damage
  • pest infestation
  • utilities (electrical, plumbing, septic, A/C, etc.)

While walking through the home with the inspector, ask them to show you where problems may potentially develop, as well as double-checking to see that pre-existing problems (related to the loss history report) have been adequately repaired. In addition, ask if there’s an upgrades or replacements that would minimize your loss in the future. Remember, if an inspector sees it, you can bet your insurance company will, too.

* * *

As you can see, finding not only a great house, but an insurable house is a huge part of becoming a new homeowner. While shopping around, don’t be afraid to contact an insurance advisor to begin the process and compare premiums—even if you haven’t settled on which house you ultimately want. That’s why contacting the insurance advisors at RiskBlock can make the process of purchasing a new home worry-free, allowing you to focus on finding the best home for your budget.