Guard Against Disaster

By Chelle Cordero

March 20, 2009 5 min read


Owning a home means protecting it with the right coverage

Chelle Cordero

Creators News Service

Home ownership involves more than just paying a monthly mortgage and utility bills. Insurance is an often-repeated word in home ownership.

However, it can get confusing: There is property, mortgage, title and liability insurance -- plus each state has its own laws to regulate it.

"When you are buying a home, there are many things you need to know about properly insuring the home," said David Zwierecki, owner and operations manager at First Security Financial Services in Ohio. "You need to know if [it] is located in a flood zone, if the area has a high chance for tornados, hurricanes, earthquakes, etc., how much it would cost to rebuild the home, has the house/basement ever flooded, is there any mold in the home, are there any wood-destroying organisms [termites, carpenter ants, etc.], what kind of condition is the home in, is the foundation structurally sound and much more."

"Insurance amounts must be at least the mortgage amount of a home, flood insurance where applicable and the contents, which an insurance professional would assist in determining," said Janice B. Leis, an associate broker with Prudential in Pennsylvania, Florida and New Jersey.

Your precious items are also important to consider. "Ask your agent about insuring valuable contents inside of your home such as jewelry, artwork, heirlooms, antiques, etc.," added Zwierecki. "Ask about whether the insurance covers the replacement cost value or actual cash value so the home can be rebuilt in case of a disaster or a fire. Sometimes the replacement cost of rebuilding a home is greater than what the house is valued at and the insurance will not cover the entire amount to rebuild your home."

Heather Wagenhals, a broker with HQ Real Estate and Investment in Scottsdale, Az., said that there are things you need to keep an eye on when it comes to how much you're going to pay.

"There are several factors that affect insurance rates. Your personal claims history -- If you have had a recent or multiple claims, your rate will be higher. Your personal credit history -- It is proven that people with average to poor credit make more claims and more felonious claims than folks with good credit."

Kevin P. Foley, owner of PFT&K Insurance Brokers in Milltown, N.J., gave a few pointers for purchasing your homeowners insurance:

* The value of the land you're purchasing should not be included in what you buy. Only include the value of the house and the contents.

* Don't skimp on how much you buy. If you want to save money, raise your deductible.

* The amount of your deductible should be uncomfortable. If it's not, it's too low.

* You can often get a discount if you buy your home and auto insurance from the same company.

* Alarms will get you a discount -- but not enough to pay for the alarm.

* Make sure underground tanks have been removed and the surrounding soil has been tested for contamination. If you purchase a home with contamination, it will not be covered by your policy.

* Liability insurance is cheap. Buy a lot of it.

* Buy cheap term life insurance in case you die before the mortgage is paid.

* Get more than one quote from more than one agent. Ask your friends and neighbors who they use.

* Both your state's department of insurance and the Insurance Information Institute have websites that contain valuable information to help you.

When it comes to your loan, mortgage insurance compensates lenders or investors for losses due to default. Meanwhile, title insurance protects the lender's loan and the homeowner's equity from defects in title at the time a home is purchased.

"These defects may include mechanics' liens, tax liens, misrecorded or unrecorded prior documents, fraud, etc.," explained Timothy Dwyer, president and chief executive of Entitle Direct Group in Connecticut. Just remember that lender's title insurance doesn't protect the homeowner. However, you can purchase an owner's policy to protect against loss due to undisclosed liens at the time of purchase.

Standard policies do not cover flood or earthquake damage. Flood insurance can be purchased from the National Flood Insurance Program through the homeowner's agent. Rates are pre-set and based upon the flooding frequency of an area.

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