Homeowners Insurance: What Home Buyers Need To Know

Homeowners insurance helps protect homeowners from financial liability in the event of an accident or disaster in their home. Homebuyers just purchasing a home often start looking into homeowners insurance as soon as they enter into the escrow period. Those buyers who know a little bit about homeowners insurance when they start to investigate it may be able to decide more quickly and definitively what type of homeowners insurance policy for them.

Lenders Require Homeowners Insurance

A home buyer paying in cash does not need to get homeowners insurance if they don't want to. However, a home buyer who is borrowing money to pay for their home will often be required to get homeowners insurance, regardless of whether or not it is desired. Mortgage lenders require homeowners to have insurance as part of the mortgage lending process in order to protect the bank's investment. This proof of insurance will be required upon the close of escrow, or the bank will not fund the loan.

Once the home has been purchased, the buyer must maintain his or her homeowner's insurance policy. If the buyer allows homeowners insurance to lapse, the mortgage lender will require the homeowner to pay for insurance through the monthly mortgage payments. These policies are usually far more expensive than standard homeowners insurance policies.

Most Homeowners Insurance Policies Cover the Same Disasters

A typical homeowners insurance policy will cover a variety of disasters and accidents that can cost homeowners money. Many policies cover incidents like theft, wind, lightning strike, damage from hail, and other weather events. Many policies also come with coverage that can pay medical bills if someone is injured on the property. This coverage only kicks in after the homeowner pays the deductible. Homeowners should always keep on hand money for a deductible to ensure that the home will be protected if damage occurs.

Homeowners Insurance Doesn't Cover Everything

Some homeowners are surprised to learn what their insurance policy does not cover. For example, most homeowners insurance policies will not cover earthquakes or floods. Palmer homeowners who want protection from these common disasters must pay for separate coverage. In low-risk areas, these types of coverage are often relatively inexpensive, but in high-risk areas, this type of insurance can be very expensive.

Premiums Are Paid Annually

Typically, homeowners pay their homeowners insurance once per year. Some types of homeowners insurance will allow their customers to pay on a semi-annual or even monthly basis, but often homeowners must pay extra money for this luxury.

Ways to Save Money on Your Home Insurance

Homeowners insurance costs about $1,100 per year, although this amount varies from one state to the next. Bigger, more expensive homes cost more to insure than smaller, more modest properties. There are many ways that homeowners can save on their homeowner's insurance.

Buying a newly constructed home in Alaska will automatically lower your premium. Insurers like the fact that new homes have new wiring, plumbing, and HVAC systems. If the home is constructed of materials that resist fire, such as concrete, brick, or stone, you’ll save even more money on your homeowner’s insurance premium.

Let’s take a look at three other ways you can save on your homeowner’s insurance when you buy a new house in Alaska.

Smaller Homes Are Cheaper to Insure

This only makes sense when you understand that your premium is based not on the value of the home, but the cost to rebuild it. Since it costs less to rebuild a smaller home than a large one, you’ll save money on insurance if you keep your square footage to a minimum. Sure, you need enough room to accommodate your family and your lifestyle, but ask yourself whether or not you really need 5,000 square feet of living space.

Add Some Money-Saving Extras

Ask your insurance agent if you’ll save if you have the builder add storm shutters or a reinforced roof. Anything that you add to fortify the structure of the home may help lower your premium.

Add Safety Features

Smoke detectors are a given in newly constructed homes and, yes, they’ll save you a small pile of change on your insurance. But ask your insurance agent how much you can save if you go beyond the basics, such as beefing up the home’s security with a high-end security system and a more sophisticated home sprinkler system.

Your insurance agent has a wealth of information on what you can do to save money on homeowner’s insurance so meet with him or her at the beginning of the construction process.

Many homeowners can also save money on their insurance by purchasing homeowners insurance from the same company that they pay for car insurance. Many insurance companies will offer a discount to customers who bundle their insurances into one.

When choosing a policy, it's important for homebuyers to remember that the lowest-cost insurances may not offer all the coverage that homeowners need in the event of a disaster. Spending a little extra money on insurance can help save a lot of money in the event of a disaster.

Contact Your Insurance Company

If you're a home buyer seeking homeowners insurance, contact your insurance company today. Getting quotes during the escrow process can help make it easier to decide which type of insurance to buy.