6 Things you need to know about Homeowners Insurance

When purchasing a home, whether you’re a first time home buyer or an experienced buyer, there is a lot to think about.

Here are some things that you’re Insurance Agent or Broker will require prior to closing:

  • Age of furnace and type of fuel, age of Roof and type, age of electrical panel and is it breakers or fuses. We may also ask, depending on the age of the dwelling, if there is any knob and tube wiring, or galvanized plumbing etc.
  • When insuring a dwelling we have to figure out the estimated “replacement cost” value. This value will determine the rest of the automatic coverage’s on your homeowner’s policy.  This value has nothing to do with real-estate value; it is based on square footage, type of construction, and age of dwelling.
  • Once we have the value, we can put together a package that best suits the insured’s needs. The policy is based on the dwelling value.  See below for an example.
    • for example, if you have $100,000 for your dwelling value ,then you will have $80,000 in contents coverage (80% of dwelling value), you will have $20,000 in additional living expense (20%) of dwelling value, $10,000 in detached private structures (10% of dwelling value). If for whatever reason the percentage calculation for the specific coverage isn’t sufficient then the value can be increased without increasing the dwelling limit.
  • Now that we have the value and the coverage breakdown we can provide pricing. Pricing will be based on previous insurance, claims history,  area house is located in, whether or not there is other supporting business with the company, payment history and some insurance companies now use credit scoring to offer more discounts.
  • Once the client has agreed to the pricing, if this is a new policy, we will require a signed application. Whether it is a new policy or just changing an existing policy we will also require the lawyer’s name and contact information.  This is so we can contact the lawyer to find out the mortgagee information; we will need to provide a binder letter for closing.
  • The binder letter will state the coverage we have in place, whom we show loss payable to (mortgagee), along with the date and the time coverage is bound for. It also includes the name of the insured (client), and any other information that the specific lender may want shown as it pertains to their rules.

Buying a house can be stressful and Insurance is quite often overlooked until the closing date.  The more information and time you can provide your Agent or Broker with, the better.  Hopefully this will help in explaining the process that goes into writing up an insurance policy for your new home.

Tom Garner

Agent for Heartland Farm Mutual Insurance.

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