In June 2018, there were more than 121 million new households formed in the United States. New household formation has been accelerating over the past few years. The strong economy is likely to thank.
New households are formed when people move into home ownership for the first time. The strong economy has enabled many people who may have been renting to buy their very first house.
You might be one of these lucky new homeowners. Maybe you’re planning to make a house buy soon. If so, you’re likely on the hunt for new homeowner tips.
Becoming a homeowner is exciting, but there are also pitfalls you need to be wary of. One of the trickiest tasks you’ll encounter is finding the right home insurance policy. Our guide will go over what to know about home insurance before you start shopping.
How Home Insurance Works
One of the first questions you have is about how home insurance works and why you’ll need it. Consider your new home an investment. Insurance helps you protect that investment.
The right insurance policy will protect your home in the event something goes wrong. If there’s a fire or a wind storm, your insurance may help you pay for any renovations. If someone breaks into your home, your insurance will help you cover the costs of stolen goods.
To get coverage, you’ll need to buy a policy. This usually means selecting a broker or insurance agent. Then you’ll review your coverage options and pick a policy.
Policies are paid for with premiums, which is a fee you’ll pay on a regular basis. Premiums can be paid monthly, quarterly, or even yearly.
As long as you pay the premiums, you’ll have coverage.
The Costs of Home Insurance
How much should home insurance cost? It’s a question many new homeowners have to ask.
The answer depends on a few different factors. The state you live in affects the cost of insurance, as does the coverage and type of policy you have. For example, there are many companies out there to choose from, which is why review pages and comparison sites are a helpful resource when it comes to choosing the right policy. The type of building you live in and the size can also affect costs.
There are some other insurance considerations. For example, if you live close to a fire station or a hydrant, your insurance premium will be a little lower.
Nationally, the average house insurance cost is around $1,100 per year.
Getting What You Need in a Policy
There are many cheap home insurance options out there, but you’ll always want to take a closer look at any policy. Just what are you getting in your coverage?
Some cheap insurance policies lower their prices by offering you higher deductibles. A deductible is what you need to pay out of pocket before the insurance company will pay a dime. The higher the deductible, the more you’ll end up paying out of pocket.
By contrast, low deductibles usually mean higher premiums. They also mean you’ll pay less if you make a claim. Low deductible plans are usually a better choice for cash-strapped homeowners.
Other policies lower their prices by offering you less coverage. A low-cost policy might offer you $500,000 in coverage. A more expensive option will insure your house for $1 million.
Determining What You Need in a Policy
The key to getting the right policy for your new home is knowing what you need. If your home is worth $250,000, then $500,000 in coverage may seem like too much. It may not be once you factor in local construction costs, the costs of building materials, and more.
Your insurance should have enough coverage to build a replica of your house.
At minimum, your homeowner insurance should include coverage for the following:
- Personal property
Personal property coverage helps in the event your belongings are stolen or lost. Liability coverage offers you protections if someone is injured on your property.
If you live in a flood or earthquake-prone area, you’ll want to consider extra policies to cover these events. Neither is usually included in homeowner insurance, so you’ll need to buy a separate policy. What seems like an extra cost now could save you more.
New Homeowner Tips for Saving on Insurance
Average home insurance costs have been rising in recent years. You want to be sure you have enough coverage, but you also don’t know how much you can afford.
Luckily, there are many ways to save on insurance. These new homeowner tips can help you save on your policy while still getting you the right coverage.
If you’re purchasing a new home or planning to shop around when your current policy expires, don’t wait. Shopping for insurance in advance will help you get the best rate.
If you have the capital to handle out-of-pocket costs, you can consider a high-deductible plan. They often have lower premiums. If out-of-pocket costs are too much for you to handle, opt for a low deductible plan.
Another thing you can do is look to an insurance agent or broker for mortgage insurance. You can bundle homeowner insurance with other insurance products. Better yet, you may get a better deal on the mortgage insurance too.
If you live in a flood- or earthquake-prone area, it’s a wise idea to buy these extra insurance policies. They could save you more in the long run. If the cost seems too high, you can read more now about controlling the costs of flood insurance.
Make Your New House a Home
Now you know what to look for when you start shopping for homeowner insurance. Although it may seem like an expense now, having the right insurance will save you more in the long run.
If you’re not sure you have enough insurance, talk to your insurance agent. They can help you determine what policy you need.
Are you looking for more new homeowner tips? Take a look around the blog. We cover everything from home décor to how to buy a new house.