Here are some tips and insights to help you navigate the purchase of insurance for your new home. Homeowners insurance is a complex matter and every situation is different. Your needs are unique compared to your neighbors and friends, and for that reason securing the right insurance takes time.
Congratulations on your decision to purchase a new home! Listed is some advice intended to help you in purchasing Homeowners Insurance. You should always seek professionals to assist you with the entire purchase process and your individual situation.
Tip #1: First year of insurance is usually required to be paid in full.
As a condition of having a mortgage, it is usually required by the bank, that you pay for one year of insurance in advance. Be prepared at the closing if you need an insurance policy to be paid in full.
Tip #2: When possible, get details about any damage or claims from the previous owner.
Prior claims and damage to the home can impact your insurance rates and availability. Prior damage from water, flood, or fire may limit the options to insure a specific home.
Tip #3: Get the property inspected prior to the purchase.
The inspection report should provide you with detailed information about the property and systems. Ask the inspector to determine the age of the roof, electrical system, plumbing, and heating systems. If the age cannot be obtained, ask for an estimate to be included in the report. Insurance companies will request this information, and it can impact the availability and cost of insurance.
Tip #4: It is never too early to get your insurance agent involved.
A trusted local independent insurance agency can be a great resource for local services, advice, referrals, and knowledge. The staff are also members of the community and a great source to utilize.
Tip#5: What is a binder and why is it required?
When purchasing your home, a binder will be requested by an attorney or bank. The binder provides proof that insurance has been purchased and that your new insurance policy will start the moment you close and take ownership of your new home. When a closing gets delayed, or additional information is required, your binder needs to be changed to reflect this.
In Rhode Island, for example, the home mailing address, town name, and geographic area or village can all be different, and the property location on your binder may need to be changed. Provide your insurance agent with the contact information for the bank and attorney, and ask the agent to make sure the binder information meets all requirements. At Apple Valley Insurance, we know the questions to ask and what is usually needed.
Tip #6: Your insurance score impacts the cost of insurance.
Rhode Island allows the use of credit based insurance scores for underwriting and rating decisions. Your insurance score is one of the factors that insurance companies use to determine the cost of insurance.
A great credit score is not a guaranteed of a great insurance score. Also, a low credit score decreases the possibility of having a good insurance score. If you are buying a home with another person, ask your insurance agent to provide insurance options using each person as the first name on the policy.
With some insurance companies, a different insurance score will be created based on the first name on the policy.
Tip #7: Items that insurance companies inquire about.
This is not a full list, however these are the major items that could change or impact insurance availability.
- Pets (There may be a dog and/or animal prohibited list.)
- Oil tanks that are buried in the ground
- Flat roofs
- Business conducted on the property
Tip #8: Home insurance policies can have hurricane deductibles in Rhode Island.
Your homeowners insurance in Rhode Island may have a hurricane deductible. This can be a flat amount or a percentage. The common practice is a percentage of the structure coverage A amount up to 5%. The structure coverage A is the part of the insurance policy that pays for losses to the building or structure.
What this means is a loss caused by a hurricane may have a deductible (the portion you pay) up to 5% of the insurance coverage you purchase for the structure coverage A. Example: your home has $250,000 of insurance coverage on the building, there is wind damage due to a named hurricane, the hurricane deductible would be $12,500 if you have a 5% deductible.
Hurricane deductibles are different for every insurance company. Some companies have a 1% or 2% hurricane deductible for every home they insure in Rhode Island. Other insurance companies may have a high deductible along the coast in towns like Narragansett, a lower deductible in the middle of the state in towns like Johnston, and a minimal or no hurricane deductible in the northern part of the state in towns like Glocester or Burrillville.
For some towns in the middle of the state like Warwick and Cranston that have coastal areas the hurricane deductible can vary between companies. Ask your insurance agent for details about the particular house you are buying.
Tip #9: Combining Homeowners Insurance with other policies can save you money.
Most companies offer policy discounts if you bundle your insurance. Insuring your home, car, umbrella, and/or other insurance together will usually save you money.
Tip #10: Ask about an Umbrella policy.
An umbrella policy is extra insurance protection for the unforeseen. An umbrella will provide an additional layer of liability protection in the event of a claim resulting from things like an accident or lawsuit. This policy will help protect your assets that now include a home. The cost of an umbrella policy is minimal, usually less than a dollar a day.
One additional tip: Realize that things don’t always go as planned. Remember, that as your trusted choice insurance agent it is our goal to assist you into new home ownership every step of the way.
I truly wish you the best, and hope you enjoy your new home!
Please note that this article was written to help you in general terms. Please consult a professional to discuss your specific situation as it relates to things discussed in this article.
David Brush, CIC
Apple Valley Insurance
Apple Valley Insurance helps people and businesses with insurance needs. We serve all of Rhode Island and have many options for Home and Auto insurance programs.