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Homebuyer: What You Need to Know About Insurance
Why is an independent insurance broker a great option when needing insurance?
The insurance broker has the ability to shop many insurance companies while looking for the best company and best pricing to match your needs. A ‘captive’ agent has only one option because that agent works for a single company, which isn’t always best suited for the homebuyer. The independent insurance broker writes insurance for multiple companies but does not work for any of those companies, thus, the independent agent’s focus is squarely on the client, not on a corporation.
Should I use my lender’s preferred agent or any Joe agent?
Your lender is there to help you in every possible way and looks out for your best interest. While you can choose any insurance agent you wish, you should really consider the agent your lender recommends. Your lender has come to highly trust that insurance agent and believes he will take the best care of you and also look out for your best interest. In a very real way, this agent is an extension of your lender.
Replacement Cost vs. Depreciated Cost
Some insurance companies have gone to a “depreciated cost” settlement option when it comes to certain coverages such as roofs (like an actual cash value based on the age of your roof) or even personal property. Unless you have the money to “self-insure” for a loss, replacement cost is always the best option for your roof, dwelling and personal property.
Should I bundle my insurance? (e.g. home and auto)?
In order to save the most money bundling your home and auto(s) together is the best route to take. Depending on the size of house, bundling can easily save several hundred dollars off the home insurance premium. And, it’s advantageous to have all your insurance with the same agent for the purpose of providing a more comprehensive care of you and your insurance needs.
What do all the coverages mean anyway?
A homeowners insurance policy consists of multiple core coverages and many optional coverages based on your needs. The insurance agent should ask you about your needs when you set up the policy. ‘Dwelling’ coverage protects the actual structure. ‘Personal Property’ covers all your “stuff” you put into the structure. ‘Medical’ covers basic medical payments for guests to the home. ‘Liability’ covers larger claims against you (such as your dog bites someone, your tree falls on your neighbor’s house, etc.). ‘Loss of Use’ refers to the insurance company paying for you to live somewhere temporarily when you can’t live at your home due to a covered loss. Other coverages, such as “Ordinance & Law,” “Backup of Sewer/Drain/Sump Pump” are two important coverages. ID Recovery, In-Home Business (if you operate a business from the home), Personal Articles (for jewelry, gun, antique and other unique collections), “Loss Assessment” are other coverages you might consider.
What kinds of coverages should I have?
All homeowners insurance policies have the same basic core coverages (dwelling, personal property, other structures, liability and medical). Apart from those core coverages, two other highly recommended coverages would include: Backup of Sewer/Drain/Sump Pump, higher levels for “Ordinance and Law” especially for older homes. Due to so many variables between homeowners, other coverages are available as well but aren’t always relevant for everyone. Be sure to consult with your insurance agent for other coverages relevant to you and your needs.
What’s the deductible?
The deductible is that part of an insurance policy that you as the homeowner pays first, then the insurance company pays the remainder of the cost for any given claim. Because Colorado sees so many weather-related claims, which are expensive, many insurance companies have changed their deductibles to a percentage or higher dollar amount. An independent insurance broker has options for you to keep the deductible low, fixed and affordable for you in the event of a claim.
Why does my lender require $XX amount for my dwelling coverage?
Your lender may require higher insurance amounts for your dwelling coverage. Occasionally the estimate to rebuild a home is considerably less than the loan amount to purchase a home. The bank needs to make certain that, in the event of a total loss, that it won’t lose its investment in your home. In many circumstances however, as long as the cost to rebuild estimate adequately describes the home in its many components (roofing, flooring types, square footage, finishes, etc.) the lender’s requirement is satisfied. But you’ll want to work with your insurance agent and lender if you have questions on sufficient coverage versus loan amount.
Should I go online to find my insurance?
A small percentage of people (around 3-4%) go online for their insurance. However, what most of these people find is that, while it might save them time and occasionally saves them money, the lack of customer service and relationship with an agent isn’t worthwhile. It is recommended you have an agent you can personally know, who can walk you through a claim, who knows you and your circumstances, and you can build a trusting relationship with. This is another good reason to use your lender’s preferred insurance agent.
Is flooding covered by my homeowners insurance policy?
Flooding is always excluded from a standard homeowners insurance policy. FEMA took over flood insurance well over a decade ago because flood claims are so costly, so costly that one flood could decimate an insurance company’s ability to pay out claims. If your home is (or will be) in a flood zone, your lender will require you to have both a homeowners policy and a flood insurance policy.
Provided by Steve Hakes: Steve Hakes was drawn into the world of insurance back in 2010, starting as a ‘captive’ agent for a big-name company. He quickly realized his clients had few options and no price breaks so he resigned as an agent and started Rocky Mountain Insurance Center in Lafayette, Colorado, in Fall 2013. He has committed himself and his office to offering numerous options for insurance companies at an affordable cost while also servicing clients’ needs. He has a passion for helping people understand what they have and protecting them in the best ways possible. Steve is married and has three wonderful kids that keep him busy. In addition, he enjoys walking, running, biking, sailing and playing music.
