If you’re like many people buying a home in Phoenix, Scottsdale or a nearby community, your REALTOR® will probably talk to you about buying homeowners insurance. Your lender will most likely require it – and if you’re buying a home with cash, you may want it. But what is homeowners insurance, and what should you know before you buy a policy?
5 Important Things You Need to Know Before You Buy Homeowners Insurance
Homeowners insurance is a protective policy you can buy that covers repair and replacement expenses when something happens to your home. Your lender will require it because it wants to protect its investment – but even people who buy a home with cash still want a “just in case” policy.
Before you start shopping for home insurance, here are five things you need to know:
- Your location determines pricing
- You may want to buy flood insurance as well
- Your pool may cost you more
- Having a high deductible may be a good idea
- Your home’s claim history matters
Here’s a closer look at each.
Homeowners Insurance Tip #1: Your location determines pricing
Where your home is located has a lot to do with how much your policy costs. (Size, the home’s condition and its construction type also play a role.) Homes that are near fire departments – or that are close to fire hydrants, for that matter – may cost less to insure. The same is true with police stations.
Homeowners Insurance Tip #2: You may want to buy flood insurance as well
Most homeowners insurance policies don’t cover flooding, which means that you may need to spring for an additional flood insurance policy. You can generally get that through the same company. And don’t think because we live in Arizona we don’t need it – monsoon season has been known to cause a few disasters.
Homeowners Insurance Tip #3: Your pool may cost you more
If you have a swimming pool, you may want to increase your liability coverage. That’s true even if your pool is behind a 6-foot wall in your backyard. Liability coverage is designed to pay court costs and other expenses if you’re somehow found liable for an accident. If you don’t want to increase your liability coverage, you may want to buy an umbrella liability policy that provides an extra layer of protection. Your insurance agent can tell you more.
Homeowners Insurance Tip #4: Having a high deductible may be a good idea
You’ll definitely want to get quotes from at least three insurance companies before you decide on a policy. That way, you can compare rates, deductibles and coverage options. In some cases, it’s a good idea to have a higher deductible – maybe the highest you can afford. On average, people file home insurance claims every eight to ten years, which means it may be a while before you actually need your policy to kick in; in the meantime, you’ll save on monthly payments. However, that’s not right for everyone (or every situation), so you should talk to your insurance agent to learn more about how a high deductible will impact you.
Homeowners Insurance Tip #5: Your home’s claim history matters
Your home’s insurance claim history matters, even if something happened before you owned the house. Your home’s claim history is part of the Comprehensive Loss Underwriting Exchange, or CLUE. It contains all kinds of records – and if any of them are from the past five years, your insurance rates could go up.
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