What Home Buyers Need to Know About Buying Hazard Insurance
When you buy a home, you should also buy hazard insurance (also known as homeowners insurance). The idea of hazard insurance is that if your home burns down, or is badly damaged from a plumbing leak, or experiences a significant loss from a home burglary, etc., then your insurance will help cover those losses. There are different types of hazard insurance policies, and if you are getting a loan for your purchase, your lender probably won't give you the loan until you prove that you have whatever insurance policy the lender requires. Talk to your loan officer about what type of policy you are required to have.
Is the Home Insurable? An important thing to find out before you remove your investigation contingency is whether or not the home is insurable. Some homes in San Diego County are literally not insurable for various reasons. Some homes might be considered to be a riskier proposition by some insurance companies (depending on the home's proximity to fire hazard areas, flood zones, etc.), and therefore cost more money. You won't be able to get a good loan on the property if you can't get insurance. In some rare instances, you may not care about insurance (for example, if you are independently wealthy and you want to live on an eroding bluff with a 180 degree ocean view, whatever the cost may be). For the rest of us, insurance is an important part of the home purchase.
It is important for you to know that each insurance company is different when it comes to rates, areas that they insure, and the types of insurance that they offer. If the first insurance agent you talk to gives you bad news, you very likely will receive different news when you call around to other companies. It's also important to know that much of San Diego is now considered to be in a High Fire Hazard Area (since we've had some big fires in recent years). I recommend that you interview three or more insurance agents and get detailed quotes from each.
Who Should I Call? First, call your current insurance agent (whoever you use for your auto insurance, for example). He or she may be able to offer you a discount for adding a new policy to your account. Next, call around to other major insurance companies that have offices in your area (Farmers, State Farm, etc, etc.). Lastly, call an insurance broker or two. By having multiple conversations with different insurance agents, you will end up making a more informed decision.
What Should I Ask About? First, tell them you are buying a home and you need to get a quote for hazard insurance. Tell them the home address and ask them if they can offer insurance for that property. Ask the insurance agent to send you a list of what the policy covers and how much it costs. Make sure that the insurance agent tailors the policy to your specific needs and the specific features of the home. If you have expensive pieces of jewelry, art, etc. be sure to have those covered. If the home has an updated kitchen, flooring, etc. be sure that those are included in your policy. If your home burns down (which is highly unlikely, but if it does) you want your insurance company to give you enough money to build the home exactly the way it was. If your policy is not set up correctly, then they will not give you enough money (and that just defeats the purpose of having insurance, right!?). The more questions you ask, the more informed you will be about choosing the company and the policy to go with. I also encourage you to ask about adding earthquake insurance. There are different opinions out there about earthquake insurance. Some don't want to spend the money. Get informed and make the right decision for yourself. If your home is located in a flood zone, you may need to also purchase flood insurance. You may wish to purchase flood insurance if your home is located on a slope or in an area in which you think could possibly allow water into a portion of your home during a heavy rain storm.
Also ask whether or not the insurance policy will be subject to a follow-up inspection and what that entails. Some companies require an on-site inspection by one of the company's representatives, and others do not have that requirement. This may or may not be a bad thing, but it's good to know about it in advance, in case you have any concerns about this.
Some people like to bundle all their insurance products with the same company to receive discounts. It is true that many companies offer discounts when you have more than one policy with them. Now may be a good time for you to explore what sort of savings you can get by putting all your insurance policies with the same company. Be sure you are comparing apples to apples (same coverage, same deductibles, etc.) when you do this! It may take you an extra few hours to consolidate, but it could save you a lot of money over the course of the next several years if you take the time to figure it out now.
As usual, if you have any questions during this process please contact me right away. As your exclusive buyer agent, I'm here to help you through the whole buying process!
Justin Gramm is the founder and principal broker of Globella Buyers Realty, your San Diego Exclusive Buyer Brokerage.
Exclusive Buyer Agents do not list homes for sale and never represent sellers. They have no "inventory" to try to sell you. They can represent you in purchasing any home. They are specialists at representing buyers only on the buyers' side of the transaction. Exclusive Buyer Agents work to get buyers the best price and terms when they buy a home.
If you have excellent credit and plan to buy a home or condo in San Diego County within 90 days, contact Justin Gramm to hire an agent on your side of the transaction. More about Justin Gramm on Google+. Call Justin at (858) 437-2662 or E-mail.