As soon as we started looking for a home with a real estate agent, she advised me to get preliminary quotes from several insurance companies so we would be able to move quickly once we went into escrow. If you’re getting a loan, you can’t close the loan without insurance in place, and the first year’s premium will be paid through your escrow company in advance.

How to Research Homeowner’s Insurance
The initial research is simple. Follow these steps to accomplish the task in a few hours:

  • Approximate the average price, size, and age of the homes you’re looking at. In our area, that was about 1500 square feet and built in 1950.
  • Compile a list of potential insurance companies. Ask friends and relatives who own homes for recommendations.
  • Check your state insurance commissioner’s website, online review sites, and the Better Business Bureau’s site for ratings for each prospective insurer for homeowners and auto insurance (if you drive.) A combined policy will save you a few hundred dollars every year.
  • Visit the websites of three or four your top choices for online quotes. It will take a few minutes to complete the forms on each site. Most should supply you with an instant quote. For your auto quote, base your decision on the level of coverage you’ll need after you move into the home, not the lower level you most likely have now.
  • Contact your current auto insurance agent for a quote. You may get an additional discount for being an existing customer.

How to Choose an Insurer
Although you’re more likely to use your auto insurance, I decided to choose my insurance based on the best homeowner’s coverage because it has a much higher value. On the insurance websites, you can run different scenarios to adjust your cost. You can’t change the value of your home – that’s based on a formula – but you can adjust the deductible, the personal liability coverage, and a few other factors. I chose a $2500 deductible and a million dollar personal liability rider.

I narrowed it down to two possibilities, one of which is my current auto insurance company. When we went into escrow, I called each for a specific quote for the specific property. The quote I received was actually lower than the online quote, despite the home being larger than my estimate.

When making my decision, I relied on three primary factors:

  • Reputation – Does the company have a good BBB rating and insurance commission rating?
  • Coverage – Does the homeowner’s policy include the coverage I require?
  • Price – I wouldn’t automatically choose the cheapest, but I wouldn’t choose the most expensive if other factors were equal.

Once you have your quote, get the agent’s name, phone number, fax number, and any other information you need to complete the escrow form and submit it as quickly as possible. Our escrow company requires the information at least 10 days before closing to avoid delays.

Comments

3 Responses to “First-Time Buyers: Shop for Homeowners Insurance in Advance”

  1. Meredith on July 9th, 2009 9:27 am

    All very good points about Home Owners insurance. As an insurance broker for over 30 years I would add to your list:

    “Replacement Cost” coverage for your real and personal property is essential. Although it costs a little more than “Actual Cash Value”, in the event of a covered loss you will be more fully compensated.

    Anytime you need more information on Personal or Commercial Insurance – just ask me.

    Meredith

    Always consider adding at least $1Mill. to $5 Mill. Umbrella Liability (liability limits that extend upwards over your Home Owners and Auto liability). The Umbrella coverage gets cheaper as the limits go higher. And remember, in the event of a lawsuit you can be sued for future earning potential as well as all your worldy goods.

    Financial and Health Care Companies are rated by A.M. Best Company (www.ambest.com). If you can’t figure out how to access or read the info ask your current insurance agent.

    Make certain your house is insured to value -the value it would take to rebuild in your area (not the selling price, the construction cost). You can check with local contractors for the current cost to rebuild, per sq ft. Normally you don’t include costs for the foundation, as the foundation isn’t usually destroyed in a fire. In other words, your insured value will NOT be the same as your selling price value.

    If your rebuilding costs are over $1Million and/or you live in a secluded/brush/hill area there are only 2 or 3 insurance carriers that insure to “Replacement Cost” value and they have the most comprehensive coverage. They are Chubb, Fireman’s Fund and sometimes AIG (if the former AIG policies are still in force?). I highly recommend Chubb or Fireman’s Fund.

    PS I don’t currently work for or with any carriers mentioned above.

    Lastly: read you policy (I know it’s tedious) as there are limitations on many items like jewelry, fine art, silver, money, coins, collections, etc.

  2. Steph on September 22nd, 2009 9:36 pm

    Well to point out, that never happens because first time buyers have no clue, it is usually done by the agent.

    Steph

  3. Aryn on September 23rd, 2009 10:34 am

    Hi Steph,

    Three people in my office have bought houses in the last six months. Not one of our agents found our insurance for us.

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