Buying your first home is an exciting time!
Protecting your first home with a homeowners insurance policy presents a policy you’ve probably never encountered before.
Here are five and a half insurance tips to help you understand your new risk management needs:
- Market Value and Replacement Cost are different ways of valuing your home, and they have absolutely nothing to do with one another. Market value is how much you pay for your new home. Replacement cost is an estimation of how much a homeowners insurance company will need to pay if that home is completely destroyed. Rebuilding a property is totally different from re-buying a property.
- The condition of your home matters – A LOT! You need a solid handle on the age and condition of the mechanical systems in the home. Does the home have circuit breakers? Is the plumbing modern (copper or PVC)? What type of furnace do you have? How old is it? Some red flags to watch out for – aluminum or knob & tube wiring, galvanized steel plumbing, and fuses instead of breakers.
- The age of your new home’s roof matters – A LOT! Many homeowners insurance providers are reducing coverage for asphalt shingle roofs that are over 15 years old. Older roofs may only qualify for Actual Cash Value (depreciated) loss settlement on wind and hail claims. Some PA homeowners insurance companies won’t insure a shingle roof that is over 20 years old. Do your best to nail down an actual age from the previous owner or your home inspector.
- Pools, dogs, trampolines and steps with more than three risers are all Personal Liability hazards that Homeowners Insurance providers look at closely. Pools usually should be fenced in with at least a 36” fence. Certain dogs, like Pit Bulls and Doberman Pinschers, can limit the number of insurance providers willing to cover you. Trampolines are a red flag unless they have a 6’ net enclosure. Steps with three or more risers and no handrail are a red flag for many homeowners insurance companies.
- Your homeowners insurance provides A LOT of coverage. The policy provides coverage for the replacement cost of the residential dwelling, other structures (like detached garages, sheds and pools), personal property, additional living expense (if you have a claim and can’t live at your house, they’ll pay for a hotel or apartment), personal liability and medical payments. You get all of this, usually several hundred thousand dollars of each, usually for only a couple of hundred dollars. It’s kind of amazing.
Ok – here is your “and a half”
Buying your first home creates another significant insurance need – LIFE INSURANCE. You are likely signing up for several hundred thousand dollars of debt for decades, usually along with a
spouse or family member – that financial obligation needs protection from the unexpected. A good term life insurance policy, if you are in good health, will provide hundreds of thousands of dollars of coverage for only a couple of hundred dollars a year!