Anchor Insurance Blog

Insurance Tips for Home Buyers

Posted by Anchor Insurance on Apr 13, 2017 7:50:59 AM

Buying a home is a huge investment. It’s exciting, yet sometimes stressful, as there are numerous things to think about and do to prepare for your closing date.  Buying home insurance is only one of those things. And while you may be tempted to quickly check this item off your list at the last minute, be sure you understand the coverage you are choosing. You will thank yourself later! Your home insurance policy is designed to protect your new investment from unforeseen circumstances. If disaster strikes, you want to have enough insurance coverage to repair costly damage without draining your bank account.

So how do you go about selecting the best policy and coverage for your home? Here are a few tips:

Research

Before purchasing a house, know what you are getting into and the risks involved. An independent agent can help you do your research, so your first step is finding an agent you trust.  “Your agent will have access to databases, research and other resources that the public can’t access without a paid subscription,” explains agent Trey Hutt of Hutt Insurance.

One example is a Comprehensive Loss Underwriting Exchange (CLUE) report on the property. This will provide you with a comprehensive summary of the claims and losses on the home for the past seven years.  In addition to the CLUE report, consider factors such as the location of the home, age, proximity to the fire department, construction type and roof shape. These aspects can result in discounts or surcharges. Your agent can provide guidance on what to look for.

Areas closer to the coast may require a Wind Mitigation Inspection.  A wind mitigation inspection verifies construction methods that provide greater protection from wind and hurricane damage. Even if it’s not required, always consider a Wind Mitigation Inspection. According to Shaun Murphy of Pablo Beach Insurance Group, the inspection usually takes very little time, costs about $200 or less, and can result in some serious savings on your homeowners policy, up to 88% off the wind premium.

Actual Cash Value and Replacement Cost

The best type of home insurance policies offer "replacement cost" coverage on your property and contents. This type of policy insures your property for the cost of rebuilding or replacing your entire home with similar quality and type of materials. When shopping for a policy, we strongly recommend you purchase enough insurance to cover a total loss.  This is known as insurance to value (ITV) and this number can be much different than the market value of your home.  Your agent can help you estimate the amount of insurance you need to fully protect your home.

Some policies offer "Actual Cash Value" (ACV) coverage. ACV, on the other hand, is your home and personal belongings’ current cash value. It's important to note that the cost of rebuilding and removing debris from your home will most likely exceed the cash value. Therefore, an ACV policy may only cover a percentage of the final damage cost. Although an ACV policy is usually cheaper than a Replacement Cost policy, it may leave you with more out of pocket expense, so be sure to weigh the benefits of coverage and discuss it with your agent

Wear and Tear of the Home

When you buy your new home, it’s critical to assess what repairs are needed. Even if a mortgage company doesn’t require it, always opt for a home inspection before you buy. If your home is more than 25 years old, you may be required to get a Four Point Inspection (not to be confused with a Wind Mitigation Inspection). 

A Four Point Inspection focuses on four main areas your home:

  • HVAC (Heating, Ventilation and Air Conditioning)
  • Electrical wiring and panels
  • Plumbing connections and fixtures
  • Roof

The inspection and report describe the condition and age of these elements, helping to determine if it’s time to replace or repair them. This knowledge is key to protecting your home and yourself. A home with a roof nearing the end of its reliable service life is more likely to leak or fail during a storm, causing major damage. Outdated HVAC, electrical and plumbing systems in poor condition or that were improperly installed could be dangerous if they fail and cause fire or water damage to your home.

Don’t risk it. Ask the seller to make updates and repairs before you buy. Most insurance companies will require it. You’ll have peace of mind your home is in good working order. Plus, the updates often result in a lower price tag in your premium.

Fill-In Coverage Gaps

Every situation is different and not all policies are the same. “Buyers should ask their agent about exclusions, such as animal liability, diving boards, and trampolines,” emphasized Trey Hutt. Sometimes, these coverages can be added on. For example, if your home has a screened enclosure and it’s not covered under your policy, it’s likely you can add that coverage by way of endorsement. If there are several coverages you want to add, consider a bundled package, like Anchor’s Premier Package.  It boosts coverages limits and adds replacement cost coverage for personal property, screened enclosure coverage and much more at a price that is less than buying these coverages individually.

Be aware that some catastrophes, such as floods and earthquakes, are not covered by a standard homeowners policy. If you buy a home in an area that’s prone to any of these occurrences, it’s a good idea to add these coverages by purchasing a separate policy.  It may even be a requirement.

Furthermore, you may also want to add an umbrella policy for excess liability coverage. These extended policies set a limit over (and in addition to) the standard homeowner's insurance policy.


Bottom line, when searching for your new home, be aware of the many features that can impact your insurance. Find a trusted insurance agent that can guide you through the process and it will be much easier!


Special Thanks

A sincere thank you to the Anchor Agents who helped contribute to this post. We appreciate the information and insights you shared with our audience. 

Trey Hutt of Hutt Insurance

Shaun Murphy of Pablo Beach Insurance Group


Stability When You Need It

You can rely on Anchor Insurance for stability when you need a little (or a lot) of help. Our swift claims response and warm customer care will provide you reassurance in unsteady times. Rest easy knowing you and your home are protected by a solid insurance company that can stand the test of time.

Find an Agent

Topics: Homeowners Insurance