A few helpful tips to understand what new homeowners should be looking for in their insurance
By Taylor M Haines, Independent Agent
September 11, 2020
Buying your first house can be both exciting and stressful, as anyone who has been through this process knows. You've secured your pre-approval, your bid was accepted and you're moving steadily towards the closing date. The last bit of paperwork your lender is going to require to seal the deal is your homeowner's insurance.
Determining what coverage to get, understanding how it applies to your home and what company to place your coverage with can be a bit daunting. But fear not, as an independent agent who has helped more than 500 clients close on their first homes, I can put those fears to rest with a few helpful tips.
Tip 1: Don't let the banks do it for you
Trust me on this one, get an agent. Make sure you Google or Facebook their name, read their reviews, and find a trusted advisor. Your agent is someone who is working on your side, in your best interest, to get you the product you need that suits you best. I've seen countless times where banks issue a quote to a customer and the pricing or coverage is nowhere near the mark where it should be. The myth that the bank will make it easier for you is also just that: a myth. I've had customers come to me the day before their closing and we had a policy drawn up, bound, and sent over to the closing department of the bank in less than an hour - and they still ended up getting better coverage for less.
Tip 2: Make sure you're getting Replacement Cost (NOT Cash Value or Market Value)
In insurance, we call this the property's valuation method. Replacement Cost Valuation (RC or RCV) provides a limit of coverage that is calculated to be enough coverage to actually replace the property in the event of a loss, regardless of Market Value or Cash Value.
You want to make sure you have enough coverage to rebuild the home brand new - this is especially true with older homes. Here in Buffalo, NY many of the homes are older, built in the 20's and 30's. These homes, while maybe only selling for an average of $150,000, may cost significantly more than $150,000 if they were to burn to the ground and have to be rebuilt. Insuring for anything less than replacement cost could end up short-changing you if you ever need to use your policy.
Tip 3: Optional Coverages are your friend
Remember, your insurance agent is not a snake oil salesman. The "extras" that we sell are usually very important because they are optional contractual coverages that are not automatically included on the base contract (insurance is, after all, a contractual promise by definition). Specifically, make sure you have Water & Sewer Backup, Service Line Coverage (if available), and ramp up the Personal Liability to an adequate amount. These coverages can spare a very large expensive if you ever have to use them.
Tip 4: Request at least two quotes
If you're using an independent agent, request that they quote the property with their two most competitive carriers at minimum. Most independents will run the gauntlet of insurance providers they have available to make sure they are pricing out with the best coverage and rate. Captive agents (those who work for just one company) are only able to give you one perspective; an independent may have as many as 10 or more companies to run quotes with, giving you a real sample of the rates/coverages available in your market.
Don't let the process overwhelm you to the point where you give up or settle for less. You always have a choice; it is your home, you have much more control than you might think. Use these tips as a guide as you consider your new purchase and put your mind at ease.
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Taylor M. Haines
Is the Vice President of Operations for Encompass Agency, Inc. of North Tonawanda, NY. Encompass represents more than 1,500 individual clients across 3 states for both personal and commercial lines of insurance. Originally from Skaneateles, NY, he moved to Buffalo in 2009 and is a graduate of the University at Buffalo (B.A., 2013) and SUNY Buffalo State College (M.S., 2016). For email inquiries, please send to firstname.lastname@example.org