Do You Have A Mortgage?
If you have a mortgage on your property, your mortgage company will require that you maintain homeowners insurance. If you are using an escrow account to fund your taxes and insurance, the type of plan you choose will affect your monthly mortgage payment.
Because your home serves as collateral for your mortgage, mortgage lenders will require you to have adequate homeowners insurance in place to protect themselves. Federal law requires mortgage lenders to send borrowers written notice at least 45 days before charging them for force-placed insurance. If your lender does buy insurance on your behalf, you can request that the lender cancel it if you obtain your own coverage. Typically, force-placed insurance is much more costly than insurance found in the open marketplace.
How Much Coverage Should You Have?
An important consideration when choosing any insurance plan is how much coverage you should have. There is almost no end to the amount of insurance you can purchase. Typically, for a customer with a mortgage, the mortgage company is going to require that you carry “replacement cost coverage.” Replacement coverage is just that: coverage based on what it would cost to rebuild a home of similar size and quality if there were a total loss. Depending on the carrier writing the policy, you may be able to purchase “actual cash value” or “functional replacement cost.” Replacement cost is likely the most expensive form of coverage, but it is also typically considered the best coverage. In the event of a partial or total loss, your home should be rebuilt or repaired with the same quality materials that were present prior to the loss.
Many enhancements can be added to a homeowners policy that an agent will often recommend. For example, backup of water/sewer or sump pump failure is excluded from a standard homeowners policy unless properly endorsed. In areas where basements are common and freezing/thawing happens regularly, this can be a very common type of claim. This type of coverage typically has a sub-limit (a cap on the maximum amount the insurer will pay for a specific category of loss or item, set below the overall policy coverage limit) of $10,000 or $20,000, but without the endorsement, a sump pump failure or a sewer backup issue will be an uncovered claim.
It is important to note that flooding is an excluded peril under homeowners policies. A separate flood policy is required if the homeowner is interested in protecting themselves from overland flooding.
How Can You Save Money On My Premium?
Many factors determine the cost of the policy. Everything from your insurance claim history to the amount of coverage and even the area your home is located in will affect pricing, but there are ways to save on your homeowners insurance. Some examples include increasing your deductible or bundling your home policy with other policies, such as your auto policy. Updates to electrical, plumbing, roofing, and heating systems can also reduce the policy premium. A good agent will outline which factors affect the price of the coverage, and it is then up to you, as the homeowner, to decide which items you wish to address.
Do You Need An Insurance Agent?
Having a good insurance agent who will talk with you about the coverage you need and what you can afford is very helpful. Similar to having a good real estate agent, you want a professional agent who can help guide you through the buying process. A good insurance agent can save you time and money by finding the proper company for your individual exposures. They should help you determine the coverage you want and the coverage you need to meet your lender’s requirements. Be sure to read your policy carefully to understand it, and if you don’t, ask questions. Knowing your deductible and what is and is not covered is as important as knowing your monthly payment.
When you have a mortgage on your home, your monthly insurance payment is often included in your monthly mortgage payment, along with any property taxes and assessments. Talk with your insurance agent first, then make sure your mortgage broker is included, so both professionals can ensure you have the proper coverage in place.
More Information
Here is a helpful link to more information on home insurance PDF:
Interested in a quote or have more questions?
Contact Adam Schaan, Insurance Sales Agent, at Insure Forward at
701-866-3272 or adam.schaan@insureforward.com.