Tips to Avoid Expensive Home Owners Insurance Mistakes
You are finally ready to buy your dream home. You have been able to
obtain excellent financing and you are even in a position where you are
able to place a fair amount of money down on the purchase. You are
excited because everything seems to be going well at this point.
Unfortunately, this is where many homebuyers hit a snag because they do
not stop to consider insurance and the role it may play in their new
purchase. Many people are so excited about the idea of their new home
that they simply do not take into consideration the importance of
locating the best coverage possible and working to save money on their
new homeowner's insurance policy. Homeowners insurance can become quite
expensive rather quickly and before you know it your insurance premium
could easily amount to as much as 25% of your total mortgage payment. If
your mortgage is already close to the maximum amount you can afford, a
high homeowner's insurance premium could potentially push you to the
brink of bankruptcy.
The first step in making sure that you do not get in over your head is
to take some time to research insurance rates. Most insurance companies
will happily provide you with a listing of possible discounts that could
reduce your total insurance cost; even if you do not happen to be
purchasing insurance at that precise moment. Some of the most common
possible discounts include being located near a fire hydrant, police
station or fire station. Combining your homeowners insurance with other
insurance can help you to save as well. Also, if you have a security
system installed, you may also be eligible for a discount. Features of
the home you plan to purchase may be able to save you some money as
well. For example, insurance on a brick home is often less expensive
than on a wood frame home. If you have storm windows on the home, your
liability could be limited as well. Other possible discounts include
having smoke detectors and fire extinguishers installed.
Before actually making an offer on a home, it is a good idea to not only
look at the features of the home but how it is zoned as well. Find out
if there is any special type of zoning for that property, such as a
flood zone. If the home is located in a flood zone, it is possible that
you may need to acquire additional insurance which can be expensive.
Additionally, make sure you obtain crime statistics for that area. This
is not only a matter of peace of mind, but can also affect the cost of
your insurance. If you live in a high risk area, your insurance is
likely to be higher.
There are also other ways you can reduce your insurance costs as well.
Always make sure you find out whether the insurance package insures the
land. Most people never stop to think about this and they end up paying
insurance on the land when there is no real reason to do so. Even if the
home is destroyed, the land will always be there, so try to deduct the
land from the final cost of the insurance.
Once you have purchased your home, do make a point to update your
insurance frequently. This is a mistake that many people make and it can
be costly. While you are still making payments on the home, you are
actually paying down the amount that must be covered by the bank. You
can therefore save money by lowering your coverage so that you are not
paying more than the actual replacement value of the home. Take the
savings and apply it as additional payments to the principal of your
mortgage, allowing you to pay it off sooner and save money in interest.
Finally, consider increasing the amount of your liability. Most
homeowners simply take whatever deductible is presented to them by the
insurance agent. To save money, avoid doing this by requesting a higher
deductible if you are able to maintain enough in savings to cover
emergencies. Of course, this is only a smart financial move if you are
able to actually maintain enough in savings to cover that higher
deductible if something should happen.
As you can see, stopping to plan ahead can actually save you a great
deal of money on your homeowner's insurance and can ultimately help you
to avoid getting into a situation where you are house poor and over your
head in mortgage and insurance payments.