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Homeowners Insurance Tips for First Time Buyers

First Time Home Buyers Insurance Guide

So, you're buying your first home! Being a first-time home buyer can be both thrilling and challenging. Among the things you'll want to put heavy thought into is a homeowners insurance policy. Buying insurance isn't an easy process, but if you keep some important things in mind, it can be less stressful.

Why Homeowners Insurance?

While not required by law, mortgage companies require home buyers to have homeowners insurance before closing on a house. The mortgage company holds a lien on the home until you have paid it off. They require insurance to protect their investment. 
You don't need to keep homeowners after the mortgage ends, but it's a very good idea to do so. 
Here are the most important things covered by homeowners insurance:


Should a covered peril damage your home, your policy will help pay for repairs. Many policies cover damage to external structures such as fences, garages and sheds. You can cover plumbing, electrical, heating and AC as well.
It's a good idea to have enough coverage to rebuild your home at current costs. 
It shouldn't come as a surprise that similar sized homes can differ in value. A 3,000 square foot home with custom work costs more to cover than an average 3,000 square foot home. Make sure you get an accurate replacement cost estimate of the home before you purchase a policy. 

If belongings in your home get damaged, homeowners insurance pays to repair or replace them.

There's a difference between Actual Cash Value and Replacement Cost that you should be aware of. Replacement cost is the value to replace an item at the present time, while ACV takes depreciation into account. This means that older items will lower in value with ACV estimation. For this reason alone, replacement cost policies tend to be better than ACV policies.


Your homeowners insurance policy provides liability coverage. If an injury occurs on your property, your insurance can protect you from lawsuits. It's a worst case scenario, but you could lose your home if you don't have adequate coverage when an injury occurs. 
Most standard homeowner's policies require a minimum of $100,000 in liability coverage. However, if you look at hospital and legal fees in a liability case, $300,000 in coverage is more practical. Does your property have high-risk factors like trampolines or pools? If so, consider an umbrella policy to cover extra costs.

Living Expenses

If you need to relocate as repairs occur, homeowners helps cover costs like hotel, meals, and travel.
Most policies gauge additional living expenses (or ALE) based on your coverage. The standard policy will give 20 percent of your home's coverage amount for ALE. The amount of time that companies provide ALE for varies. Some provide a 12-month limit; some have a 24-month limit. Speak with your insurance agent to find your ideal ALE coverage.

What's Homeowners Insurance Doesn't Cover

While homeowners insurance can cover a lot, it's important to be aware of what isn't covered. The majority of standard policies do not cover:

Injuries from a home business
Dog bites from dangerous breeds
Unsecured attractive nuisances like trampolines and pools
Sewer backup
Claims from tenants
Construction damage
Sewer backup
collectors' items

Being aware of what isn't covered can save you a lot of loss and heartbreak. It is in your best interest to look at insurance riders to cover your bases.

House History

Another important thing to look at when searching for coverage on a new home is the state of the house. Some of the best money you can spend at this point is a home inspection. This will give you an excellent insight into the state of the house. If a home inspection was not part of the buying process, you should get one done. The amount of money you spend on an inspection will be nothing compared to what you save on emergency repairs.

Getting a Discount

Speaking of discounts, there are some steps you can take that may get you a cheaper price tag on your insurance bill:

Safety First- Safety upgrades such as security systems, deadbolt locks, and smoke alarms can drop your premium.
Renovate- Making sure your house's plumbing and wiring are up-to-date are great ways to get lower premiums. Also, it's a great long-term investment towards boosting the value of your home. If you do a major upgrade to the home, the value of the home can change. Make sure to review your coverage levels after you renovate.
Shop Around- Homeowners is a competitive business, and it's a good idea to take look around. Every agency has different metrics to price a policy. While one plan may be cheaper, that doesn't mean it's better. To make sure you get the best deal for your money, compare quotes from several insurance companies.
While there is a lot to consider, this should help make your home buying experience no more difficult than it has to be. A good agent can help you learn more about what options there are to protect your piece of property and peace of mind are well protected.


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