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Tips for Choosing the Right Insurance Plan for Your Home
Buying a home is the largest investment that many people will ever make, which means you’ll want to keep that investment protected whether you purchase in Houston, Charlotte, San Francisco or somewhere else. And, most lenders require mortgagees to carry homeowners’ insurance as they want to know the loan will be repaid if catastrophic damage should occur.
While the amount of insurance you’ll need to carry can vary depending on the loan type, according to Mortgage Reports, for Fannie Mae you’ll need to secure coverage that’s equal to 100 percent of the insurable value of improvements. It also must be enough to repay any unpaid principal mortgage balance, provided the amount is 80 percent or more of the value of those improvements.
Of course, you’ll want to carefully weigh insurance plans for protecting that big investment.
Determine the Coverage Amount You’ll Need
While your lender has specific requirements as to the amount of insurance coverage it requires you to have, you’ll want to make sure that your home is insured for its replacement value, and not just what you paid for it. It should reflect the cost of bringing materials to the site and rebuilding if your home is damaged or destroyed. If your home is on acreage or a larger lot,
keep in mind that the insurance company won’t insure the land, so the amount of the policy may be quite a bit less that what you paid for that home.
Shop Around, Comparing Apples to Apples
To find a policy, you don’t necessarily want to go with the cheapest price. Shop around, getting quotes from several companies, comparing similar coverages, limits and deductibles. It’s also important to consider the company’s reputation, customer service and whether or not it offers 24/7 support. If it’s not up to par, should you have to make a claim you could end up with some big regrets.
Find out the rating of each company by checking with A.M. Best which provides third-party ratings for just about any insurer across the nation. The ratings compare each business to other businesses and then evaluates them against industry standards, assessing the company’s ability to meet customer obligations like paying claims.
Choosing the Right Deductibles
By choosing higher deductibles, your monthly premium will be lower, but it also means that should you have to file a claim, you’ll have to pay more out of pocket. A lower deductible means higher premiums, but you’ll shell out less cash after a claim. There isn’t necessarily one right answer here as it really depends on your personal situation and financial security.
Take Advantage of Potential Discounts
Most insurance companies provide discounts on homeowners’ insurance for things that can mitigate risk. For example, installing smoke detectors and burglar alarms helps to reduce fire and burglary risks, so you’re likely to be able to save money on your insurance premiums. Some companies offer other discounts too, from special first-time homebuyer discounts to discounts for having a high credit score.