Home Insurance Tips For First Time Homebuyers

Once you have found that special house for your first home then comes the bewildering buying process. Choosing the insurance required by your mortgage needs attention but is often overlooked during this unfamiliar process. Don’t shortchange this important protection of you new home. It is important to step out of the quick sale agenda of the home seller to understand what insurance you are buying, customize the insurance package and make you own selection of insurance company.

What is the “Hazard Insurance” that our mortgage bank is requiring?

For most situations, the “Hazard Insurance” coverage will be provided by a Homeowner’s Insurance policy. The mortgage bank’s concern is with the protection of their collateral (your house) from hazards of fire, lightning, tornado, etc. Your Homeowner’s Insurance policy includes coverage for these risks on your house but goes well beyond the banker’s requirement to include coverage for your possessions, loss of use and more.

What other insurance is being required?

Your mortgage bank may also be requiring Flood Insurance if your house is in a “Special Flood Risk Area.” In Texas, if your new house is located along the Gulf Coast your mortgage bank may also be requiring Windstorm Insurance.

How much insurance does our new house need?

The mortgage bank is looking for enough insurance to cover the loan. Often, a higher or lower amount of coverage is more appropriate. Your purchase includes the land, site improvements (fences, driveway, etc.) and your house. Figuring out a reasonable amount of insurance for the house is part of my job. Having an adequate amount of insurance to rebuild your house is important. At the same time, too much insurance is not a good value.

Why is buying your home insurance from a professional important?

Buying home insurance is far more than just meeting your mortgage hazard insurance requirement. Getting the right amount of insurance for your house, ample to rebuild but not more than is needed, is critical. An insurance professional can guide you to appropriate contents coverage and liability protection. While neither is a mortgage requirement, it is still important to you as the homeowner.

What insurance company should I choose?

Your mortgage banker or home seller likely will have a suggestion. My experience with letting the banker or home seller select a home insurer is, at best, mixed. Their key concern is selling you the mortgage and the house. Their focus is not on the long term viability of the insurer or service down-the-road. A couple of years ago, Texas Select Lloyds, then the sixth biggest home insurer in Texas, was suddenly shutdown by our Texas Department of Insurance – they had been a favorite suggestion of several of our local home builders for several years.

How can I reduce the cost of my Home Insurance?

Cost is important on any purchase including insurance. Buying a companion auto policy from the same insurance company often provides a 10% discount on both insurance plans. Choosing a higher deductible is a trade-off in risk but can reduce insurance cost. If you decide to have a monitored burglary alarm, be sure to ask for the insurance discount. Other discounts may be available. Too often I see first time home buyer overwhelmed by the buying experience while allowing important insurance decisions to be inadequately considered. Getting help to understand your home insurance choices is easy; call your insurance agent. If you don’t have a relationship with an insurance professional, this is a good time to start one.