Archive for July, 2021

What Do Brooklyn Homebuyers Need To Know About Homeowner’s Insurance?

Thursday, July 15th, 2021

Insurance form for Brooklyn homebuyer.

Brooklyn homebuyers will need to obtain a homeowner’s insurance policy when they purchase their new home.

There are two reasons you will need to purchase a policy.
  1. To protect your possessions.
  2. To satisfy the mortgage lender’s requirements.

If you are financing your home with a mortgage, the lender will require a one-year prepaid homeowner’s policy to be in place before you can close on the house. Most lenders will require the insurance company to list the lender on the policy. In addition, lenders require dwelling and liability coverage on the home at 100% replacement value. This requirement protects the lender from loss should something catastrophic happen to your home.

The coverage required by the lender is not the only insurance you should have on your home. In addition to dwelling and liability coverage, you should also consider:
  1. Other structures that are not attached to the home including detached garages, sheds, fences, and guest houses.
  2. Personal property coverage will reimburse you for replacing your possessions like furniture, electronics, appliances, and clothing.
  3. If you cannot live in your home due to damage, you may receive payment for the cost of living expenses while your home is renovated.
  4. In addition to the liability, the insurance company will cover the medical bills of someone hurt on your property.

There are also different types of homeowner’s policies. The kind of policy you need will depend on the type of home you purchase and the level of coverage you desire. Here is a thorough outline of the different policies in this post from Bankrate.

Brooklyn homebuyers will need to choose a deductible.

A deductible is the amount of money you will pay out of pocket before the insurance coverage will take over. A higher deductible usually results in a lower premium. You will pay the deductible on each claim you submit to your insurance company.

Homeowner’s insurance will not cover natural disasters, “Acts of God,” or acts of war. However, you can obtain additional insurance policies like flood insurance, mine subsidence, and windstorm insurance policies. 

Some other additional types of coverage Brooklyn homebuyers choose to add to their homeowner’s policy are drain and sewer line coverage, identity theft, and business property coverage for a home-based business.

You may need a rider policy that extends the coverage of your standard policy. You should check with your insurance agent and review the coverage you have periodically.

Several factors determine the premium you pay. You should shop several different insurance providers because the rates may vary depending on the company. The amount of coverage and various rider policies will also affect your price.

The following factors will affect your total cost:
  1. The amount it would take to replace your home is a significant factor. The actual amount it would take to rebuild your home determines the replacement cost. The cost to replace can vary depending on several factors, including the cost of materials and any improvements you have made to the home.
  2. If your home is brick or frame can also affect the amount of your premium. Brick homes generally have a lower premium.
  3. The proximity to fire hydrants and the fire department may factor into your premium. 
  4. The age and condition of the house are also factors to consider. Costs are generally higher the older the home. 
  5. A surprising factor to Brooklyn homebuyers is the history of claims from previous homeowners and the history of claims in the area.
  6. The type of coverage you choose will affect the amount you pay.
  7. The higher the deductible you select will lower the premium price.
  8. Many Brooklyn homebuyers do not realize you can reduce your costs if you use the same insurer for your home and auto policies.
  9. Some insurers will consider the length of time you have been a policyholder with their company.
  10. Your credit score may also affect the cost of your insurance policy.
  11. If you have filed claims on previous insurance policies, this may be a factor in pricing your new homeowner’s policy.
  12. You may lower the cost of your insurance by having safety features in your home like security devices and sprinkler systems.
  13. Another factor that can affect pricing is a wood stove, furnace, or fireplace.
  14. Recreational features like a pool, trampoline, or play equipment may also increase your premium due to the potential for injury.
  15. The type and breed of pet you have can affect your insurability
  16. Operating a business from your home can also increase the costs of your home insurance policy.

Before purchasing a home, you may want to research the home’s history based on the C.L.U.E. report (Comprehensive Loss Underwriting Exchange). This report will show you the record of claims against the property.

Cancellation of a homeowner’s policy or non-renewal by the insurance company can occur for several reasons.
  1. Failure to pay your premium. 
  2. Fraud or misrepresentation occurred when obtaining the policy.
  3. Changes occur in the property that deems it uninsurable.

Brooklyn homebuyers should understand that the number of claims you make on the property can also determine having your insurer renew your policy. Some insurance companies restrict the number of claims you can make in a given period. You will need to check with your insurer to understand their rules. Consider making minor repairs out of pocket and not filing a claim.

What can a homeowner do to reduce the expense of their homeowner’s insurance? 
  1. As mentioned before, costs may vary from insurer to insurer. Compare several different companies before deciding on your provider.
  2. Choose a higher deductible to lower your premium. A higher deductible will cost you more out of pocket for a claim but will save you on your annual premium.
  3. Using the same insurer for your home and auto policy can be a cost saver.
  4. Improving your home security can save money. 
  5. Maintain a good credit history. You should check your credit score regularly and correct any mistakes you may find.
  6. Review your policy annually and adjust for any changes. For example, improvements to the home and the value of your personal possessions may call for adjustments to your policy.
  7. Maintain your home. Preventative maintenance on your home can save you in the long run for many reasons, including your homeowner’s insurance claims. 
Don’t confuse your homeowner’s insurance with a home warranty.

A Brooklyn homebuyer may receive a home warranty when they purchase their home. This policy will cover appliances and systems of the house. The home warranty will also have a deductible that the homeowner must pay. A home warranty will not cover you for fire, smoke,  theft, weather damage, or fallen trees. 

If you do need to file a homeowner’s insurance claim, contact your insurance agent. It is important to note that you should make efforts to protect your home from further damage. For instance, you may need to clean up backed-up water or board up the house from damage. A claims adjuster will work with you to evaluate the damage to the property. If you have any issues or questions about your insurance claim, you can contact the New York State Department of Financial Services.

It is essential to understand your coverage under your homeowner’s insurance policy. Consult with your insurance agent to ensure you have the right coverage for your needs at the best cost possible.

It is vital to maintain adequate insurance throughout your ownership of your home. Hopefully, you will never have to make a significant claim, but you will have the peace of mind that comes with knowing you can face any potential issues.

If you are considering becoming a Brooklyn homebuyer, you may want to check out this previous blog post to familiarize yourself with the homebuying process.

Charles D'Allesandro

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate. As a Brooklyn real estate agent with over 30 years of experience, I can help you through the homebuying process. I can be reached by phone at (718) 253-9500 ext. 1901 or by email at [email protected].