Homeowners Insurance: What to Consider When Buying or Selling Your Home
Before You Call the Movers, Talk to Your Insurance Advisor
While other segments of the economy have struggled under the weight of the pandemic, the real estate market has seen increased home prices amidst soaring demand. Many people have found themselves living and working in the same space. Suddenly, the house is too small or lacks a home office, a feature that might not have been critical prior to the pandemic. If you find yourself in this crowd or are just ready to make a housing change, it’s never been more important to do your homework before you plan that move.
Like many people, you might be so excited about the search for the perfect home that insuring that new place is the last thing on your mind. However, lenders typically require proof of insurance well in advance of the closing.
Obtaining homeowners coverage at a moment’s notice may not be as easy as you think.
Important Homeowners Insurance Considerations
Physical risk. It’s important that a home have good bones. For homes over 20 years old, insurance carriers will want to know about updates to the roof and heating system. For much older homes, they will also need to know about updates to the wiring and plumbing. In the event there is any working knob and tube wiring, you may run into some issues. This type of wiring is common in homes built prior to 1940 and is regarded as a hazard. With a newer roof and updated plumbing, there is less chance of water damage, which is the most common and costly cause of loss.
When purchasing a home in an area prone to catastrophic events, such as flood, hurricane, wildfire, or earthquakes, you need to give your advisor as much notice as possible.
In these environments, insurance carriers have much stricter eligibility guidelines, and the number of carriers willing to insure homes in these areas is declining.
Protect your investment. In addition to discounts for the basic loss prevention features such as deadbolt locks, fire extinguishers, and smoke detectors, many carriers offer deep discounts for homeowners who take additional loss prevention measures. Consider installing a central station burglar and fire alarm system, backup generator, low temperature monitoring system or water leak detection system which shuts off water at the main valve when a surplus of water is detected. Installation of these devices has never been easier. In addition, many carriers work with preferred vendors who offer discounted installation rates for policyholders.
Replacement cost versus market value. Homeowner policies are designed to insure your home for its replacement value, which is the cost to rebuild your home in the event of a total loss. This is a very different number than the market value (or what you paid for the home). This can be a tough pill to swallow.
In most cases, the replacement value is considerably higher than the market value.
The exception to this rule is a home purchased in a prime real estate area, where you are basically paying for the view. Coastal Florida is a perfect example. Any good carrier will complete a home insurance appraisal to verify what the replacement value should be and to identify any potential hazards. Costs for construction materials, skilled labor, architect fees, debris removal, and much more are included in the replacement value.
Comprehensive coverage. Not all insurance policies are equal. Unfortunately, many people don’t realize this until after they have experienced a claim. It’s better to pay a little more upfront than to pay a lot more after a claim due to inadequate coverage.
Hire an advisor and advocate. Like insurance companies, not all advisors are equal. Let’s face it, there are only so many insurance carriers out there. It’s important to hire an advisor who understands the various policies and educates you on the coverage they provide, as well as any special limits and exclusions. If you own multiple homes, watercraft, valuable art, or collections, make sure your advisor specializes in preserving these assets.
You want an advisor who will always advocate on your behalf, especially if you have a claim. This can make the difference between a poor claims experience and one that results in the best possible outcome.
It’s always personal. While Realtor.com‘s 2021 housing forecast predicts continued escalating home sales, you can always count on your insurance advisor to stay on top of market trends to make sure your new home is properly protected. It doesn’t get much more personal than that. Contact me directly to discuss your unique insurance needs.
For more information visit our Personal Risk page or contact:
Senior Private Client Advisor, CPRIA, CISR Elite
Note: This communication is for informational purposes only. Although every reasonable effort is made to present current and accurate information, Oswald makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information. View our communications policy.