Most people don’t know enough about the home buying process. There’s nothing to feel bad about because it’s not as easy as buying grocery. There are various terms you should be aware of such as ‘closing costs’ and ‘property taxes’, etc. But if you don’t, our professionals are always ready to help. Just get in touch with us!
It’s important to know about home insurance in detail if you’re planning to buy your first home. We’ll shed some light on insurance-related things so that you don’t feel left out before buying a home.
Homeowners Insurance Is Calculated Differently Than Renters Insurance
In case you have renters insurance, then the amount you pay is mostly based on the value of the property. On the other hand, homeowners insurance covers what’s inside your house along with the value of the structure itself. However, a lot of other factors come into play too.
Most people expect things like geographic location or proximity to natural disasters to impact a premium, however, even things like the distribution of fire departments and quality of water pressure in your neighborhood can impact your premium. The reason behind this is because the chances of damage or loss are greater if it’s going to take a long time for first responders to reach you. Typically, the renter’s policies cost about 10 to 20 percent of what a homeowners policy would cost.
Costs Are More To Rebuild A Home
The coverage amount of your home insurance is based on what it would cost to repair or replace your home in the event of loss or damages. When it comes to your coverage amount, it doesn’t make any difference to what you paid for your home even if you consider your homeowner's insurance. Just for instance, let’s say you bought a home for $180,000 in a down market. Your insurance may company may tell you that you need to insure it for $30,000 as per their calculations considering the replacement cost for your home, after you factor in things like building materials, labor, etc.
In essence, your coverage amount is all about how much it costs to rebuild. How much you paid for your house is irrelevant to your coverage amount. These estimates are ultimately just to prevent you from ending up homeless if something happens to your house.
Replacement Values Are Not Equal
There are two kinds of coverage options - 1) covers the replacement value of your possessions, 2) covers the actual value of your possessions. In the first type of coverage option, let’s say your kitchen appliances encountered electrical damage due to a storm. Your insurance will cover brand new appliances for whatever was lost. In the second coverage option, the actual value means that if you had those same appliances which you bought for say $700 three years ago, then due to depreciation, you might only get $30 in replacement coverage in the event that it gets destroyed because that’s all they are worth now.
Replacement value coverage is more expensive because in the event when the worst happens, you want to ensure you’re not stuck footing half of the bill to replace your own valuables. So it’s best to speak with an experienced real estate agent when doing your research to stay informed about exactly what kind of coverage you’d be getting, and how it will be reimbursed in the event of loss or damage. Also, make sure you ask about the exclusions as well because things like jewelry, may only be covered up to a certain amount.
We all know Google is really helpful, but it can’t do everything for you. This has become a habit for millennials, to Google everything they aren’t aware of. While Google may be able to provide information based on your research, it won’t spoon feed you like how an experienced real estate agent can.