For many people, buying a home or apartment usually involves borrowing a large amount of money.
What You Need to Protect Your Investment
So, when you borrow a great deal of money from a lender to purchase your home or apartment, you need to make sure you’re protecting one of the single largest purchases you’ll make during your lifetime. A comprehensive Homeowners, Cooperative or Condominium Insurance policy represents the best way to protect your investment from many kinds of property and liability losses.
What Goes Into Rating Your Homes’ Insurance
First, don’t wait until two or three days before your closing to start looking for the perfect homeowner’s policy. Start getting quotes when you go to contract because this usually gives you a window of opportunity of at least 30 to 50 days to get quotes and make an intelligent insurance purchase. Ask every broker or agent you contact for a quotation based on your homes’ full component replacement or construction cost (RCT), not the market value or the mortgage amount. Ask them to provide you with a printed copy of the replacement cost calculations. You want to guarantee you own enough coverage to completely rebuild your home after a covered loss. Our office uses a “Property Insurance Quote Work Sheet,” to develop an accurate replacement cost.
Following is just some of the information you should know and provide to each insurance agent:
- Your homes’ outside square footage (If you just give the inside dimensions, you won’t have any walls;
- How many legal apartments (Illegal apartments/tenancies are a huge no-no);
- Number of floors above the basement or slab;
- Whether your walls are plaster or drywall. Are they painted, wallpapered, wainscotted, have ceramic tile or other coverings and the percentage of each;
- Number of bedrooms;
- Number of bathrooms;
- Number of kitchens;
- The last partial or complete repairs or upgrades were made to the roof, plumbing, heating, and electrical systems;
- Is the roof gabled or flat? What type of roofing material is on the roof?;
- Does the house use gas or oil for heat?
- Does the electrical system use circuit breakers, or fuses?
If your home was constructed before the current building codes became law, include Ordinance or Law coverage. This is necessary so you can meet those additional rebuilding costs caused by building code changes.
When buying a home, purchase an HO3 policy. Besides replacement cost coverage, this policy also provides coverage for detached garages and tool sheds on your lot, your personal property, additional living expenses so you can rent a temporary apartment in case of catastrophic damage to your home, and liability insurance in case you’re sued. If your property doesn’t qualify for an HO3 policy, you do have an option. The New York Property Insurance Underwriting Association (a.k.a. “The Fair Plan”) offers a fire insurance policy that meets bank insurance requirements.
Determine how much personal property coverage you need by preparing an up-to-date home inventory of everything you own, down to your last sweat sock. With a good home inventory, you stand an excellent chance of being fully compensated after a covered loss. Without one, your full recovery is doubtful.
Unsure about the value of your jewelry, furs, silverware, cameras, and fine arts? Get them appraised. Even the best policies offer only limited amounts of coverage in their basic contracts for these valuable articles. To get proper coverage for valuable items, you’ll need to show a current appraisal before you can add an endorsement to your policy for each item’s value.
Why Flood Insurance
Consider buying flood insurance. A typical home, renters, coop, or condo policy does not cover flood losses. If your home is located in a Special Flood Hazard Area (SFHA), the law mandates your bank must require flood insurance for closing and for the life of your mortgage. Even if your home isn’t located in an SFHA, broken water mains, or even severe thunderstorms or hurricanes can create flood losses.
Why Renters Insurance
Not ready to purchase just yet? Purchasing a Renters Insurance policy to protect your possessions is a smart move. Should you suffer a burglary or fire loss without Renters Insurance coverage, you may be forced to replace your lost possessions using the money you saved for your future home.
Other Coverages To Consider
Buy life, disability, and long-term care insurance policies, and establish an emergency repair fund. The worst tragedy your family could suffer is losing your home because a family wage earner who lacked insurance dies or becomes disabled. Also, unexpected home repairs force choosing between either paying the mortgage on time or making necessary repairs. Don’t let your sacrifices and hard work to become a home or apartment owner go to waste. Buy the life, disability, and long-term care insurance coverages necessary to protect your investment, and create an emergency fund so life’s unexpected events won’t destroy your dreams.
You’ll work hard to purchase and keep that home, so put plans in place to protect your investment.
Eustace L. Greaves, Jr., LUTCF, a.k.a. BrooklynCovered.com, is a New York State licensed Insurance Agent and Broker and Continuing Education Monitor. Call him at 718-783-2722, or email him at Eustace@insuremeeg.com to check your life, home, flood, disability, renters, coop, condo, long-term care, and auto insurance needs.