Homeowner's Insurance

Whether you’re selling your home for sale by owner (fsbo) or going through a real estate agent, remember that no lender will do a loan for a home that doesn’t have homeowners insurance. You should have a good understanding of homeowners insurance from the buyer’s perspective and from your own.

Disaster Insurance that you May Need to Purchase:

Flood Insurance - If your home is located in designated flood zone.  Most flood insurance is written through the National Flood Insurance Program (NFIP), which is administered by the Federal Emergency Management Agency (FEMA).

Wind Insurance - If you live in a hurricane area, you will need insurance protection against hurricane force winds that can damage your home and threaten your family's safety. Several states, including Alabama, Florida, Louisiana, Mississippi, North Carolina, South Carolina and Texas, offer windstorm coverage pools for people who can't get private coverage. Residents of some coastal counties in Georgia and New York can get wind and hail coverage through FAIR (Fair Access to Insurance Requirement) plans, which are high-risk pools run by insurance companies.

Fire Insurance - If you are in a fire hazard area or a dry area like the desert, you will need to purchase fire insurance.

Earthquake Insurance - Areas of the country that are affected by earthquakes such as California, offer earthquake insurance to residents.  The deductibles are high and usually don't kick in unless the entire structure is destroyed. In California, most policies are sold by the state-run insurance pool, the California Earthquake Authority (CEA), although a few private companies also sell earthquake coverage.

Many homeowners choose not to purchase disaster insurance becomes the premiums are high, they have high deductibles and the coverage is not always full coverage. They would rather rely on the Federal Emergency Management Agency (FEMA), which provides homeowners with grants for emergency repairs and temporary housing, or the Small Business Administration (SBA), which offers low-interest loans for rebuilding.

Insurance Riders

You may want to purchase insurance riders to cover your personal articles such as:

  • Jewelry
  • Furs
  • Cameras
  • Musical Instruments
  • Silverware/Goldware
  • Golf Equipment
  • Fine Art (such as paintings, vases, antique furniture, oriental rugs, rare glass, and china
  • Collectibles
  • Sports Equipment
  • Computer Equipment

How to Determine the Appropriate Amount of Coverage

To determine the right amount of homeowner coverage, you need to estimate the replacement cost of your home, and the amount that fits your needs and budget.  "Replacement cost" is the amount you need to rebuild the home to its original condition. This does not take into effect the market value of your home or any mortgage loan or the land value. "Market value" is the amount a buyer would pay for a home, including the land, regardless of how much it would cost to rebuild the home.

When you are taking into consideration your replacement costs, you should consider upgrades, room additions and other unique features of your home. Review your policy coverage annually, and make sure you always maintain 100% estimated replacement value. It is extremely important to have enough coverage for emergencies as well.

How to Save Money on Your Policy?

Homeowner's insurance rates can vary depending on variables such as deductibles, your credit score, discounts and other factors. Here are some tips on how to save money on your policy:

  • Get multiple quotes from several insurance companies
  • Increase your deductible
  • Combine your homeowner policy and auto policy
  • Inquire if you are eligible for any group discounts if you belong to any large organizations or whether there are any discount available through your employment
  • Make your home safer and more disaster resistant
  • Maintain a good credit score and rating
  • Ask about loyalty discounts if you remain with your company for a period of time

It is necessary to maintain homeowner insurance at all times. Your lender will require this as well. Before you purchase a policy, make sure you understand the coverage you are buying. It is important to work with a good insurance agent that can help you choose the right insurance for your needs.