There are other expenses involved during the home buying process beyond just the home purchase itself.
One of these items is homeowner’s insurance. This insurance protects you from having to pay thousands of dollars if something were to happen to your house such as storm damage or theft.
Let’s go into more detail about homeowner’s insurance and what might be the best plan for you:
The basics
If you are working with a bank or mortgage lender, you are more than likely required to buy homeowner’s insurance.
The good news is that your insurance premium is included in your mortgage payments.
When working with your lender, you will select your preferred homeowner’s insurance, and they will provide you with a breakdown of what that looks like monthly.
Your first year’s premium is usually paid upfront to your lender and placed in escrow. They will pay the insurance company for you out of your escrow account.
After that, your monthly insurance payment due along with your mortgage payment will also be placed in escrow to go towards next year’s premium.
How much is homeowner’s insurance?
This varies from household to household, but according to Realtor.com, the average annual homeowner’s insurance premium is $1,445.
How does it vary? Insurance companies will be looking at these factors:
- The condition of your home
- The price to rebuild your home should any major damage happen to it (This is based on current construction rates, usually priced per square foot)
- Common natural disasters in your area. Florida is prone to hurricanes, so most homeowner’s insurance in Florida has a separate hurricane deductible.
- The cost of valuables in your home such as appliances and jewelry. You can discuss with your insurance agent what price tag to put on this.
- Features such as pools and trampolines could raise your premium. Even owning certain dog breeds can raise it! However, security systems, fire hydrants, and fire sprinklers could lower it.
Finding your best rate
Much like receiving a quote for any other service, you will want to contact three insurance companies and receive three quotes to compare.
There are also independent insurance agents that will source several different companies to find the best rate for you.
However, do not think the lowest premium is the best deal.
You want to make sure you are safely and sufficiently covered should an issue arise.
Paying for a higher deductible may save you money upfront, but when it comes time for a costly repair, you will be shelling out extra money.
Just like other processes involved in the home buying process, your Real Estate agent, lender, and insurance agent are your dream team essentially. If you still feel overwhelmed with homeowner’s insurance, this team is devoted to answering any questions and easing your worries. Do not be afraid to ask them for help with this process.
