Whether or not you have a mortgage, you should have property insurance and liability coverage.
Now is the time to shop for and line up the property and liability insurance that you will need for your new home.
We want to be sure that you understand the requirements, your options, and how to save money on your homeowner’s insurance.
You should have two types of insurance coverage:
Property insurance covers damage to the physical structure and
Liability insurance, which is is typically included as part of a “Homeowner’s Insurance Policy.”
Liability insurance covers you, the homeowner, should someone have an accident while on your property. According to Travelers.com: “The personal liability coverage within your homeowners policy provides coverage to pay for claims of bodily injury and property damage sustained by others for which you or covered residents of your household are legally responsible.”
If you will have a mortgage, your lender will soon ask for a property insurance binder showing that the first year’s insurance premium has been paid in advance. (Most lenders will then collect one 1/12 of the insurance cost with your monthly mortgage payment and put that aside in an escrow account to pay for your next year’s insurance premium when that bill arrives.)
If you are buying a condo with a mortgage, the lender will review the association’s coverage and ask you to show proof of coverage for your unit if it is not covered by the condo association’s master insurance policy. (See the section regarding condos below.) If the condo association has “all in” or “walls in” insurance coverage that covers built-ins like your kitchen cabinets, your lender may not require proof of insurance from you, but you should still obtain your own liability and personal property insurance, usually known as an HO-6 policy.
Flood Insurance is not usually included in a Homeowner’s Insurance Policy, however, flood insurance is required by lenders for properties in certain flood zones. We would have told you by now if your property required it.
From the FEMA site: “Floods can happen anywhere — just one inch of floodwater can cause up to $25,000 in damage. Most homeowners insurance does not cover flood damage. Flood insurance is a separate policy that can cover buildings, the contents in a building, or both, so it is important to protect your most important financial assets — your home, your business, your possessions.”
It is worth discussing special flood insurance coverage with your insurance agent, especially if you have a finished basement or have heating or other expensive mechanical equipment in your basement. Here is a link to more information about flood insurance: https://www.fema.gov/flood-insurance
If your mortgage rate or Purchase & Sale Agreement calls for a closing cost credit, you may be able to use that credit to pay for your homeowner’s insurance at closing; however, you will need to confirm that with your lender and attorney at least 14 days before your closing.
To easily get multiple quotes for your insurance, we recommend Mary Steeb at C & S Insurance/ 508-948-3822. She has done a great job for many of our clients. She will shop for quotes from multiple top-rated insurance companies and recommend the best option for you. Mary may also be able to get you extra discounts by bundling home and auto insurance.
If you already have an insurance agent that you would like to use, we would be happy to provide your insurance agent with any additional information needed to get you the most accurate quote possible. Just let us know.
To help your insurance agent get the most accurate insurance quote possible, you should provide him/her with a copy of the appraisal report that you received from the bank. The online property listings are not reliable for insurance purposes. If you need anything else, just let us know.
To save money:
We recommend that you ask your insurance agent to get quotes based on several deductible amounts:
$1,000, $2,500 and possibly $5,000 or more as long as you can absorb the cost of the deductible should you have a claim. (To help calculate the deductible that makes the most sense for you, you should generally figure that you are likely to have an insurance claim every 5 to 7 years.)
When getting quotes for your personal items, we recommend that you get a quote from the insurance company issuing the Master Insurance Policy and at least one other insurance company. (Note: Good insurance agents will confirm the extent of your condo association’s insurance coverage to determine whether or not you will need to buy coverage for items like your kitchen and bath cabinets or determine if the condo association’s coverage includes those items and the interior of your condo unit.)
We recommend that you get your Homeowner’s insurance from the same insurance company that insures the condo association. The reasoning is that if the condo association’s Master Policy has one insurer and your personal Homeowner’s policy is with another insurance company, if there is a claim and a question about which company is responsible, a stalemate between the companies could exist that drags out the recovery and repair process. If the same company has both the Master Policy and the Unit Policy, the company will have to pay the claim regardless of which policy holder is responsible and the process should be faster and easier.
You do not need to use the same insurance agent that your condo association uses to obtain your Homeowner’s policy. You can use whatever insurance company or agent you want for the personal/unit policy; however, we always recommend that you consider the benefit of having one insurance company that holds both insurance policies.
Here are some useful links to help you learn more about homeowner’s insurance:
A Massachusetts Guide to Insurance for Your Home and Ways to Help Reduce Your Insurance Premiums:
https://www.mass.gov/files/documents/2016/07/wo/homeowners-guide.pdf
Here is a link to a page with some interesting insurance statistics:
https://www.iii.org/fact-statistic/facts-statistics-homeowners-and-renters-insurance
As always, we hope this information is helpful and we are here to address any questions or concerns that you have.
We are also happy to review and discuss any insurance quotes that you receive.
