10 Questions to Ask Before Buying Homeowners Insurance
Buying a home is a big step. It's important that you're protected in the event something happens. That means insurance. You probably know that you need homeowners insurance, but may be a little unclear when it comes to what's involved or what the options are. There is no shame in that. You can easily learn more by consulting with an insurance agent. A good agent knows almost everything there is to know about insurance and will be able to guide you in your choices if you ask the right questions. Here are 10 basic questions everyone should ask an agent before buying a home insurance policy.
1. Is the Company Financially Solid?
You want to make sure the company has been in business for a while, and will hopefully be there in the event you need to file a claim. Ask the agent if they're in good financial shape. This information can be checked via NAIC (National Association of Insurance Commissioners) Consumer Information Source.
2. Is It Wise to Buy a Policy That Covers the Cost of Rebuilding?
Many homeowners' policies will only pay for the cost of your home at the time the policy was purchased. Due to inflation and many other factors, the cost to actually replace your home is undoubtedly rising constantly. Ask about a replacement value policy and make the agent explain the difference between the various types of policies available to you as well as the consequences that could come with each choice.
3. Are Combined Packages Available?
Many insurance companies will offer discount rates if you carry auto, home, and life insurance policies with them. Combining these policies could save you a lot of money. Be sure to ask if this option is available and what type of discount you may receive.
4. What Are the Advantages/Disadvantages of a High Deductible Policy?
Having a high deductible policy can save you a lot of money, but you need to know if the coverage you get will be worth the gamble. Ask the agent what the good and bad points are of having a high deductible, and make sure they explain what a deductible percentage of the policy means. You want to make sure you only pay a flat dollar amount for each claim and not a percentage of the total value of the policy before the company kicks in.
5. Do I Need Flood Coverage?
Most homeowners' policies will cover water damage, but flood damage almost never covered without a specific flood or disaster policy in effect. Ask the agent to explain the difference, and the advantages of carrying flood or disaster insurance.
6. Will the Policy Include Replacement Value for Possessions?
As with the cost of rebuilding the home, you need to make sure the policy will cover the cost of replacing your possessions in the event of a claim. Inflation also affects the electronics, furniture, and clothing industries. If you need to replace an entire home's furnishings because of a fire, not having a replacement value policy in place would mean spending a lot of money out of pocket.
7. Is an Umbrella Policy Necessary?
Ask the agent if carrying extra insurance through an umbrella policy is a good idea, and have them explain the benefits of doing so. The extra insurance could protect you if something devastating happens that your regular policy won't cover.
8. Is There a Limit on Payments for Valuables?
If you have a collection of artwork, expensive jewelry, or something else that is very valuable, ask your agent if such things would be covered under your regular homeowners policy or if additional coverage is necessary.
9. What Are the Advantages/Disadvantages of Installing a Home Security System?
Many insurance companies will offer a discounted rate if you install a home security system. You could also get a discount for window locks, deadbolts, and other security features. Ask the agent if these discounts are available to you and find out exactly what you need to do to lower your payments without affecting the coverage.
10. What Is the Procedure for Filing a Claim?
It is always a good idea to know what the claim filing procedure is before you actually have to file a claim. Does the company make it difficult to collect, or are they easy to work with? Do they make the paperwork simple, or do you have to jump through a lot of hoops? Get timetables and make the agent explain the procedure in detail.