Whenever you purchase a home and there is a mortgage involved, the
mortgagee(the bank or broker lending you the $$) will require
homeowners insurance in at least the amount of the mortgage or the
replacement cost of the home. Many people make an error here and
below you will find some helpful tips:
The amount of your mortgage is not necessarily the amount of
insurance you need. In some cases it may be close, but you
should have an insurance agent perform a replacement cost
estimate so that in the unfortunate event of a complete loss
such as a fire, you will not have to reach into your pocket to
make up the difference you could have covered for $12 a year!!
This is not a dramatization, but the truth.
When seeking rates for homeowners insurance, have as much
information about the house as possible. The home's appraisal
is the best source of information. Call your mortgage broker
or the bank and request that they fax you a copy. They may be
reluctant, but you are paying for it and are entitled to a
copy. With this in hand, you will have the square footage of
the house, and all vital details on the heating and electrical
as well. Dont' waste time trying to decipher it, fax it to the
insurance agents you have narrowed down and let them figure
out how much you should be insured for.
You want Guaranteed Replacement Cost coverage on your policy
on both the dwelling(or structure) and your contents.
The difference in premium is minimal in most cases, but the
difference in coverage is huge! IF you do not have Guaranteed
Replacement, you will receive the depreciated value of the
item, so that 30" television you bought two years ago for
$600 is now worth $240, so that's what you'll receive. Now...
can you buy a new one for $240? NOPE!
Co-op & Condo owners: There is an important
coverage called
Loss Assessment that should be considered as the owner of a
condominium or co-op. What does it cover? Let's say your condo
association is carrying $2 million in liability coverage and a
child drowns in the pool while the lifeguard is having a
cigarette. They parents win $3 million in damages, but the
policy only covers $2 million. Guess who is assessed? You, the
condo owner and all of your the other owners in the
association. If there are 200 units, each could be assessed
$5000! The coverage is cheap and could save you quite a bit of
money, so please look into it.
Another requirement depending on the location of your property
is Flood Insurance.
Flood insurance can cost as much as your homeowners
insurance and will be required by the bank if you live in a
flood zone. IMPORTANT: do not waste your time trying to find
lower flood insurance rates as they are dictated by the
government! There is only one rate. Any deviation in the rate
will be the result of different coverages being used by the
insurance agents. Trust us on this, if there is a flood, you
will realize how important this coverage is and HOMEOWNERS
INSURANCE DOES NOT COVER FLOODS!
