Home Insurance Matters

Home Insurance Matters

Aside from the fact that home insurance is a good idea considering the size and significance of the investment it is required to get a home loan.  The problem is that because it is required many first time buyers assume that most policies are decent and fail to ask the truly important questions. Here are a few good questions to ask:

1.    What risks does your home actually face?  Insurers often think in different terms than we do.  For instance, hurricane coverage rarely covers the flooding associated with hurricanes.  So rather than talk in terms of coverage types as labeled by insurers think in terms of what disasters you may face, how they will actually damage your home.  Then cover each phase with your insurance agent to see if the name of the policy actually matches up with the disaster.

2.    How much will it cost if you had to rebuild your home today?  If you buy an older, yet nicer home, especially in a neighborhood full of older homes often the insured value of your home is set by the homes around it.  But that has nothing to do with the actual cost of replacement.  Many building materials are no longer used and some are far more expensive\cheaper today than they once were.  Make sure that when you are talking to the insurance agent that you are clear on if you want insurance that will allow you to replace your home, or you just don’t want to lose the investment you have in your home.  They aren’t the same thing.

3.    For you –Do you want a Low deductable or to keep an emergency fund?   Most people know that the lower the deductable the higher the monthly premium.  But not everyone thinks about the advantages of high deductibles paired with an emergency fund.  If you are willing to set aside a few thousand dollars to fix small emergencies you can avoid going to the insurance companies altogether.  This in turn keeps your rates low and allows you the lower monthly premiums that will help you save for your emergency fund.  Why give that money to the insurance company when you could be saving it for yourself?  Of course make sure to run the numbers first.

I hope that this list is helpful and I often help my clients through this process –it can seem daunting the first time you go through it. If you would like more information on this or anything else I advocate, be sure to check out my websites to see the rubber meet the road: Minneapolis real estate and Minneapolis homes for sale . - Mike