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Buying Homeowners Insurance

Dated: 04/14/2018

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During the process of purchasing your new home in Charleston, you will need to consider homeowners insurance. 

Here are some basics of what you need to consider:

  • if you have a mortgage, you will be required to purchase homeowners insurance.

  • If you do not have a mortgage, you should still have homeowners insurance.If you purchase your home for cash, homeowners insurance, while not mandated by the lender, is probably even more important since the entire equity is yours and therefore the entire exposure to loss belongs to you. Very few people choose not to maintain coverage. 

  • Your insurance payments are usually escrowed and paid by your lender. You may have the option of paying those payments in advance or directly during the year. Most lenders prefer the escrowed approach because it reduces administrative costs and lowers their risk.  Lenders want to be sure that their investment is protected.

  • You have a choice of deductibles even in homeowners insurance. Selecting higher deductibles will decrease your insurance costs but it also will increase your out-of-pocket costs if you have a claim. For homeowners insurance, in particular, it may be advisable to choose higher deductibles and avoid minor claims by simply paying out-of-pocket for minor issues.

  • You can choose either replacement costs or actual cash value for your property coverage. Replacement cost for your home is the amount it would take to rebuild your home without deducting for depreciation. It's wise to insure your home for at least 80% of its' replacement value. Choosing actual cash value will subject you to depreciation costs.

  • Be very thorough in determining your level of insurance need. The cost of your insurance will vary significantly based on your coverage choices. It is unnecessarily expensive to over-insure and it can be devastating to under-insure.  Discuss coverage in detail with your insurer and have them explain to you why you need each level of coverage they recommend. Some insurance companies are known for encouraging over-insuring to raise premiums. 

  • You have the freedom to shop around to select a company you prefer as your insurer.  Look at a minimum of three different companies before you choose which company you will use to insure your home. You are not required to use a company suggested by a lender or by anyone else.  I recommend that you research the quality of the lender and look at consumer feedback about service .  Especially in the area of customer service, some companies are simply more responsive than others.

  • Discuss the possibility of getting a discount on your homeowners' insurance if you bundle other insurance products with it such as automobile insurance. It may be advantageous to stick with one company for both. 

  • Discuss the potential additional options beyond the basics of the policy offered. Talk to your insurer about coverage for property damage, additional living expenses, personal liability and medical payments. Many homeowners now consider adding a liability umbrella policy a necessary safety measure.

  • In addition to understanding policy limits, review the sub-limits as well. For example, you may have a sub-limit on personal property of 50% of the dwelling coverage. 

  • Factor in the cost of riders. A rider is a policy attached to your primary policy designed to cover additional items. Using a rider to protect things such as jewelry or artwork can be an affordable way to get additional coverage that you need. 

  • If you are insuring a significantly older home, such as a historic property, you may be required to use what is referred to as HO coverage. In that case, you may have some additional riders that you should consider for things such as your heating and air-conditioning systems because they are expensive to replace and will likely be excluded on an HO type policy. An HO policy only covers actual cash value for the property.

  • Because your homeowners' insurance policy is a legal contract, take the time to read it carefully and ask questions. It may be worth your effort to have it reviewed by an attorney, although most buyers do not.

  • Place your policy in a safe location. It's better to keep your policy in a lock-box in a bank with a copy retained for your reference at your home address.

  • Your needs will change so you should review your policy coverage at least once a year. For example, making an improvement to your home, such as by adding a room or remodeling, may add value to your home and increase the replacement cost.

  • You may be required to purchase additional insurance such as flood insurance. Around Charleston, there are numerous areas that will require flood insurance coverage. 

  • In determining your need for flood insurance and your level for flood insurance if needed, there is a good chance that your lender will require that you provide a flood elevation certificate. Discuss this with your Realtor in advance. Occasionally, a closing can be delayed when there is a delay in obtaining a flood certification. Make sure your agent is proactive about this possibility to avoid delays.

How you select your insurance provider does make a difference. You may already have a relationship with an insurer. You may take the advice of friends or guidance from your real estate professional, or you may simply research the Internet to find someone who provides what you need in your area.

As with any service provider, a good referral is often your best bet. Lining up homeowners' insurance should begin as soon as you have a contract to purchase. You may even do your research and advanced and began developing a relationship with an insurer prior to contract to purchase.

Obtaining homeowners insurance, while straightforward, may take longer if you plan to live in an area exposed to storm hazards. Anywhere within the greater Charleston region, you can expect to consider issues such as flood insurance and even wind and hail coverage. Nearly every property in the Charleston region is in some sort of flood zone. Some areas will require flood insurance but not all. 

Finally, don’t forget that Charleston has experienced earthquakes. In fact, daily tremors are common although they are so slight they are usually imperceptible. Occasionally, Charleston does experience an earthquake that you will notice. It is very rare for earthquakes to cause damage in the Charleston area. However, there have been major earthquakes in the past that have been quite devastating. Because they are rare, the cost of earthquake insurance is affordable. Get earthquake insurance on your home.

If you have any specific questions about homeowners insurance, while I am not an insurance professional, I can help you with many of the questions you may have or at least refer you to a competent professional who can assist. Call me anytime.

Chris DeLoach     843-270-1272     [email protected]

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Chris DeLoach

SERVING CHARLESTON, SOUTH CAROLINA BUYERS AND SELLERS SINCE 2001 ------------------------------------------------------------------------------------ Buying a home – or selling a home – can be one....

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