Your home will most likely be one of your most valuable assets and ensuring that it is properly protected should be a major priority. As you start applying for home insurance coverage, there are several items you will want to consider that will have an impact on your home insurance program.
Market Value versus Reconstruction Cost
A common issue that home buyers come across is the market value and the reconstruction estimate of their new home are drastically different. In many cases, the market value of a home may be less then the reconstruction cost for your new home. Consider insuring your home at the full reconstruction value. This ensures that you will have enough insurance coverage to repair your home in the event of a major claim.
Always review your home insurance quotes with your lender. Several lenders will have items that they will want your home insurance policy to address. Some of these include, but aren’t limited to the following:
- Replacement Cost Coverage or Guaranteed Replacement Cost Coverage
- Maximum Deductible Permitted. This can also address percent deductibles and wind and hail deductibles.
- What Exclusions Exist in the insurance policy. For Example, will it cover wind and hail? Will your insurance policy cover sewer backup?
Factors That May Impact Your Eligibility for Home Insurance Coverage
There are several factors that insurance companies consider when they are evaluating eligibility of a new home. It is important to discuss all of these items with your insurance agent or broker during the application process.
Do you have any animals? Always be sure to disclose what types of animals you have. Several insurance companies have eligibility guidelines surrounding various dog breeds or exotic animals. Animals can impact your eligibility for insurance coverage and it is important to be transparent with your insurance agent to ensure that you are properly protected.
Updates to Your Property
Time sure does fly. Many communities have aging housing stock. Many of these properties are beautiful and have a ton of character, but they may possess conditions that can make them challenging to insure.
Here is a short list of items you will want to understand when purchasing your new home:
- How old is the roof? The older the roof, the more likely water can intrude in to your home. Several insurance companies will depreciate older roofs in the event of a claim. Many carriers will decline to offer coverage for an older roof as well. Slate roofs are typically exempt from the age restrictions. However, it is important to understand the ongoing maintenance plan that has been in place for a slate roof.
- Have there been any electrical updates? If so, what? Does the home have circuit breakers? Are there any fuses? Does the home have Federal Pacific Breaker boxes? Does the home have any Knob and Tube Wiring? Many insurance companies will decline to offer insurance coverage if fuses, Federal Pacific Breaker Boxes, or Knob and Tube Wiring exist within the home.
- What year was the heating system replaced? Many insurance carriers will not insure a home that has a heating system that is older then 25 or 35 years. Be sure to find out the age of the heating system as you are going through the home buying process.
- Plumbing updates. Find out what plumbing improvements have been done in your new home.