Buying your first home is exciting, but it also comes with a lot of responsibility. If you take out a mortgage to buy the home, the mortgage company will require that you carry homeowner’s insurance. Before you just call any insurance company and take what they have to offer, learn the important tips you should use to help you make the most of your policy.
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Insurance Companies Look at Your Past
Even though you’ve never owned a home before, insurance companies are going to look at your insurance history. Maybe you had renter’s insurance or car insurance. Did you make a lot of claims on those policies? If so, you may be considered a high-risk for claims. This will prevent you from getting the claim-free discount. It could also prevent certain insurance companies from insuring your home at all.
You Need to Know if the Home is in a Flood Zone
Homeowner’s insurance doesn’t cover flood damages. Your lender will likely require a flood certification on the property to determine if you are at risk for flooding. If the home is located in a flood zone, you will be required to purchase flood insurance, which is separate from homeowner’s insurance. You’ll pay a separate premium and possibly even have a separate insurance company that will cover flood damages.
If the home is in a flood zone, make sure you know exactly what your insurance company will cover. If there are any damages that they can tie into the flood, chances are your homeowner’s insurance won’t cover it. Knowing this ahead of time can help prevent an unpleasant surprise should you have to file a claim.
Don’t Take the Cheapest Offer
It might seem like it makes sense to buy the cheapest insurance policy available. After all, who doesn’t like to save money each month, right? But this can hurt you in the end. Rather than focusing on just the premiums, look at what the coverage offers.
Do you have enough dwelling protection? Do you have replacement cost coverage? Is there a separate rider for your personal belongings? Do you need additional riders for luxurious personal belongings, such as jewelry? Do you have enough coverage if someone were to get hurt on your property?
These are the factors you should focus on alongside the premiums. It makes sense to choose the lower premiums between the policies that offer the right coverage. Just don’t make the mistake of focusing on premiums alone.
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Your Credit Score May Matter
You know your credit score mattered when you applied for a home loan, but it may also affect your homeowner’s insurance rates too. Some insurance providers pull your credit. They want to know what type of financial risk you pose.
Do you pay your bills on time? Do you use your available credit responsibly? These are things the insurance company will look at before they determine your premium. The lower your credit score is or the more ‘bad’ credit you have on your report, the higher the premium an insurance company may charge you.
Bundle Your Insurance
One of the best things you can do is use the same insurance company for multiple policies. For example, if you have a car, use the same agent for your car and homeowner’s insurance. These two policies bundled together often offer the highest discount. Check with your insurance agent, though, because some companies offer bundling discounts for other policies as well.
The key is to shop around, make sure you get proper coverage, and that you get premiums that you can afford. Also, pay attention to the deductibles. If you end up making a claim, you want a deductible that you can afford, not one that will make you feel financially stressed. Once you put all of the pieces together, you can get the right insurance policy for your first home.
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