One of the issues home buyers need to consider when they're purchasing a home is insurance. Homeowners insurance helps protect homeowners from financial liability due to damage from natural disasters and certain types of property damage. Knowing what to look for in a homeowners insurance policy, how much you can expect to pay for this insurance and what you can do to save can help you get the best deal possible.
Is Homeowners Insurance Required?
People who pay cash for their homes don't need to get insurance, but people who borrow money for their home may be required by the lender to get insurance. Homeowners who borrowed money for their home and who don't have insurance may be forced to pay for coverage through their lender. Often these lender-forced policies are far more expensive than policies available on the open market.
How Much Does Insurance Cost?
The amount you can expect to pay for insurance depends on a variety of factors including location, size of the home, value of the home, upgrades to the home and other risk factors. Policies in high-risk areas may be more expensive than policies in low risk areas. $1,000 to $2,000 per year is typical for standard single-family homes. Policies are paid for in one lump sump for the year.
One of the best ways to save on a policy is to pair your homeowners insurance with your car insurance. In addition, raising the deductible from $500 to $1,000 can save as much as 25 percent on a single policy. Shopping around is another good way to save, and in some cases, upgrades to the home's systems (like electrical, plumbing and roof) can also lead to savings.
What's Covered Under a Standard Policy?
A normal homeowners insurance policy will pay for damages to the house from fire, lightening strike, wind, theft and hail. If the house is a total loss, the policy will pay to either rebuild the home or pay for the cash value of the house. Policies that pay to rebuild the home are generally better because the value of the home may be less than the price to rebuild. Homeowner insurance policies also pay for certain lawsuits filed against the homeowner.
Meanwhile, many homebuyers are surprised by what is not covered under their homeowners insurance policy. Earthquakes, floods, sinkholes and mudflow are all not covered under a typical policy. Homeowners who live in a high-risk area must pay for separate insurance policies to cover this type of damage. Additionally, appliances and items in the home would instead be covered by a home warranty, rather than home insurance.
When insuring a home, there are several options to choose from when it comes to the “Dwelling” coverage: Actual Cash Value, Replacement Cost, Extended Replacement Cost, and Guaranteed Replacement Cost. The better of the four is “Guaranteed Replacement Cost”. The coverage is meant to provide all the coverage needed to rebuild/replace the home, regardless of policy limits, depreciation, or construction costs. This is a highly valuable coverage to insured’s who want to know there will no issues with coverage to rebuild their home in the event of a serious or total loss.
How to Keep Your Home Insurance Premium Low
- Buy New(er) or Renovated Homes. Age of home is a crucial factor in the pricing. New homes tend to get the best pricing. However, older homes can have low premiums too. If your client is looking for something vintage or a quality ranch, make sure the Roof, HVAC, Plumbing, and Electrical have been updated.
- Get quotes sooner than later... The longer you wait, the higher the premium (by 10% in some cases). Many companies offer an “early shopper” discount for Insured’s who are responsible enough to get quotes 10 -30 days in advance of their closing. Research the best home insurance in Nashville here. ***TIP: Refer to the insurance company after you have submitted the contract to the Title Co/Bank.
- Zip Code matters. Some companies look at both what city you are buying in and also the zip code the home is in. Crime and Economic statistics impact the pricing.
- Bundle, Package, Combine... No matter what you call it, the more you can have with one company, the better your home insurance premium will be!
- Buy a home that is 67% brick or more…a Brick property gets better discounts than a property rated Frame.
- Purchase a Monitored Home Security System: Burglary and Fire. Not always, but more often than you’d think, the discount on the home insurance offsets the monthly cost for the alarm monitoring.
- Look at the Deductible. Depending on the purchase price, and insured’s deductible tolerance, a higher deductible may make sense.
- Lastly, talk to an Independent Agent. The buyer will be shopped with more than one insurance company, more options on price and coverage can be researched, and the agent can have a more objective opinion on the coverage/cost options.
If you have any questions, please don’t hesitate to reach out to me or my team. Happy Selling!
High-Value Homes Need a Specialty Insurance Carrier
When you think of insurance, do you think “One Size” fits all? If so, buyers could be jeopardizing the safety of their homes by underinsuring them or insuring them with a company that doesn't have the specialized experience to safeguard their home. High Value Home Insurance is not “One Size” fits all. It’s for homes ranging in value anywhere from $500,000 to $10,000,000 or more. High Value Home Insurance provides higher limits for jewelry, furs, watches, collections, firearms, etc.
In many cases, High Value Home Insurance provides “blanket” coverage for the dwelling, other structures, and personal property (contents). The blanket limit provides a much higher pay-out in the event of a significant or total loss. High Value Home Insurance can offer Guaranteed Replacement Cost, unlimited water & sewer drain back up, and unlimited loss of use. Companies that provide Specialty Programs for High Value Homes are being intentional by offering broader coverage and higher limits to provide the wealthy with what they need. With this sort of coverage, it's imperative to read the small print so that you don't end up in a dispute. Skaug Law point out that insurance disputes can happen because of small things such as a house not having appropriate security in the case of robbery, so it's imperative you read all related documentation and know your T&Cs.
Bottom line: There are companies that specialize in High Value Home Insurance, and there are companies that don’t. The ones that do offer superior coverage, have the risk management, and loss prevention services that are critically important to the wealthy. Please think of us as we represent companies that “DO” offer High Value Home Specialty Programs.
What Are the Options for Home Insurance?
If you're trying to buy a home and are looking for homeowners insurance, start by calling the company that provides your car insurance. If you don't have car insurance, calling an insurance broker in your area, be it Gallatin or elsewhere, is a good way to get a variety of quotes and options in one phone call. Insurance brokers work with a range of insurance companies to help their clients get the best deal.
For more information about getting a homeowners insurance policy, talk to your real estate agent. He or she can point you in the direction of a good company and may be able to recommend an insurance agent for your purposes.
The Ashton Real Estate Group of RE/MAX Advantage
The #1 Real Estate Team in Tennessee and #2 RE/MAX team in the World!