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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.



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