How to Save on Homeowner’s Insurance When Buying a New Home Part One, Purchasing Homeowner’s Insurance
By: Eric Kricher, Capstone Brokerage Private Client Advisor, November 14, 2014
The economy here in Las Vegas has been a roller coaster over the past several years. Locally, construction seems to be booming once again. The other night on the news, I saw there was actually a shortage of qualified construction workers. This must mean the economy is on the mend. Many local Las Vegas residents are, once again, considering buying a home in the valley. Before making that leap into homeownership or purchasing a new home, it is smart to evaluate all added costs involved in the purchase price. Be sure to ask yourself some simple questions about the financial responsibility and burden that homeownership brings with it.
Perhaps the most important question is, can you afford the home? Many individuals only take into consideration the cost or “price tag” of the home, not realizing there are several other expenses when it comes to being a property owner. One major thing to consider is homeowners insurance.
Homeowners Insurance can be purchased one of two ways. When you go to the bank to receive a home loan, they will require you to have an insurance policy with coverage effective on or before the estimated close of escrow. Individuals are able to either shop for insurance themselves or use the insurance the mortgage company is providing. The most lucrative way to save money on a homeowner’s insurance policy is to go through a personal lines insurance agent. An insurance agent can obtain quotes from several different insurance companies and help you to compare coverage and cost to suit your individual needs. They can also bundle your coverage with an automobile policy further lowering the cost.
Once you decide on a homeowner’s insurance policy, the next decision to make is how you will pay for the coverage. Typically there are two options. The first is to include the payment in escrow so that it will become part of your mortgage payment. This is the most popular option most likely because it is easier and one less check to write every month. The second option is to pay for the homeowner’s insurance policy directly to the carrier. Be aware that paying month to month directly to the insurance company, could associate monthly “billing or payment fees” that wouldn’t be charged if the policy is paid in full during escrow.The cost for the coverage will remain the same with either option, making it a personal decision for you and the mortgage company.
When you have a home loan, one thing to be aware of is that if the mortgage company is notified that you do not have proper homeowner’s insurance coverage they can force you to add coverage on their terms. The cost of the “forced” policy comes at a considerably higher cost to the homeowner. Be smart and use an agent to help shop insurance coverage to obtain the best option annually.
Homeowners insurance is just one of the added costs to homeownership. There are several ways to save money on homeowner’s insurance, and having a relationship with an insurance agent can save you hundreds of dollars every year. Knowing the amount of insurance needed to cover the home is also very important. Next month we will discuss how to determine proper coverage in the second part of this series, “What Homeowner’s Insurance cost is Based On.” As always for more information about homeowners insurance we are always here to help.
