topic Re: First time home buyer - homeowner's insurance. How to not get taken for a ride on coverage? in Mortgage Loans

First time home buyer - homeowner's insurance. How to not get taken for a ride on coverage?

Anonymous — Tue, 16 Feb 2021 05:59:18 GMT

Something like auto insurance is fairly straightforward, but in seeking quotes for HO insurance, the coverage suggested as well as, consequently, the premiums are wildly all over the map.

Trying to figure out what I really need vs. what they are trying sell sell me, say that I need and then all these extra add-ons..it's all a bit hard to weed through. I get this is changeable pretty easily, so I can just go with something basic and then learn more about it, about the house, and tweak it later on.

For instance, I planned on getting a quote from a broker, Geico (my current auto insurer), and smaller-town local broker than a family member has recommended and compare.

The home is 250k sales price, 3,950 sq. ft. I get area totally determines a lot of the rate, but I can say, no flooding, no earthquakes, mudslides or many other perils. It is in a Mid-Atlantic/Southern state, super low cost of living. In a city, so fire department is close, hydrant is 500' away. 1/2" finished walkout basement for basics. There are no external structures currently.

I got quoted with Zander and they are trying to suggest I insure the dwelling for $940,000 with a $500 deductible. I mean, yeah, I am not an expert in homeowner's insurance, but even I'm not that stupid.

Geico initially came in fairly high, but after I took out some of the things that weren't applicable, such as reducing Other Structures from 20% to 1% since there are none (can I not do 0, since I have none?), scaled down personal liability limit from 500k to 100k, and raising deductible from $1000 - $5000, it got to a pretty decent level. However, they are still suggesting dwelling coverage of $540,000.

Is this a reasonable coverage limit? I guess I don't understand why I would insure a $250,000 home for nearly double, even considering additional replacement coverage amount of 25%, which they also added, so effectively insuring my dwelling for $675,000 it would seem? I'd never rebuild a house for that much in the city I live in, it's a ridiculous notion.

So, considering I am a first time home buyer here, what should I be looking for in getting a policy? I know I could strip it down super low and then figure it out later on to adjust my coverage, but that seems a bit misguided. I'd like to have enough coverage, but without all the extras for now. Thanks!

Re: First time home buyer - homeowner's insurance. How to not get taken for a ride on coverage?

Anonymous — Tue, 16 Feb 2021 16:45:24 GMT

Generally, I would recommend first time home buyers try an agent/broker to see what they say as far as coverage. Work with them to come up with what you believe the coverage will be, and they should advice you as to weather you shoud increase/decrease. After you get those initial numbers, it becomes easier to switch to an online HO company.

Re: First time home buyer - homeowner's insurance. How to not get taken for a ride on coverage?

Anonymous — Wed, 17 Feb 2021 20:35:29 GMT

This is what I did and it worked out very well. Got a recommendation from my realtor and the guy he hooked me up with is an independant agent and got me a great homeowners policy with Eerie Insurance. Also got me a much better rate on my auto insurance while we were at it.

Re: First time home buyer - homeowner's insurance. How to not get taken for a ride on coverage?

hsfun2019 — Wed, 17 Feb 2021 20:49:15 GMT

I assume in each case you either provided them with a listing sheet w information or answered a series of questions?

Typically they have a formula based on size/location/fixtures etc of the house and what the cost is to "replace" the house. No joke one time looked at buying a house for 135k. The replacement was 375k because it was a 4k sq ft house etc. Currrent house we are considering is 5700 sq ft, on 1.3 acres selling for 500k. Replacement is 700k.

That 900k option sounds out of line, who knows w this crazy construction cost enviroment we are in.

I'd suggest you talk to either a broker or multiple agents. Don't tell them what the others are offering to "replace" it at.

Re: First time home buyer - homeowner's insurance. How to not get taken for a ride on coverage?

Anonymous — Mon, 22 Feb 2021 21:08:39 GMT

So when an insurance agent is figuring out how much to insure your house for, they don't look at what you can buy/sell the house for. They have to insure it for what it would cost to rebuild the exact same strucutre if it were to burn to the ground. Or a tree were to level it. Or a giant boulder to drop on it. You get the idea.

They way they do this is to multiple the square footage by the local new build cost per square feet, and factor in demo/removal of the old structure. They are required to rebuild your house in the case of a total loss. With COVID-19, there are a lot of people with a lot of time, spending a lot of time at home. They are doing a lot of home renos. The cost of raw construction materials + labor are through the roof (hah) right now. Supply vs demand.

"Other Structures" is a built in part of the policy, which is why you can't zero it out. The liability switch probably saved you less than $100. Deductible raise is a good call if you can cover the 5K if you need to, and probably saved you the most. Also ask about discounts for deadbolt locks, smoke alarms and fire extinguishers.