Your offer on the home has been accepted and you’re working your way through the tasks to close. One of those tasks will be to find home insurance for your new home. If you’re wondering how you compare this offer with that offer, you’re not alone! Over 95% of the people I talk with don’t know anything about home insurance or how to compare multiple offers. Aside from rate, there are 4 areas you should review when comparing.
Coverage Amounts: One of the first things I look at is the amount of coverage on each area of the policy including, the home or dwelling, personal property or contents, personal liability, medical, and each option. This helps you determine if you’re receiving an “apples to apples” quote.
- Divide the dwelling amount by the square footage to confirm you have at least $105 to $120 a square foot for a starter home, $121 to $140 for a mid-grade home and $141 to $300 for a higher end to luxury home. There should not be wide variations in the amount of home coverage.
- Contents should be either 65 or 70% of the dwelling coverage. Less than 50% is too little even if you’re buying it off Craig’s List.
- Personal liability usually starts at $100K for most carriers, but I recommend $300,000 for first time homebuyers to someone making a combined household income of $100,000 and $500,000 if you’re making more or have a pool or trampoline.
- A lot of quotes I see show $1,000 in medical. Bump this to $5,000 as it will only add a couple of dollars to do so and it’s better coverage.
- Confirm each quote provides replacement cost coverage on the home, including the roof, and your contents. If not, move on.
Coverage Type: The next area to examine is the type of coverage each home insurance quote includes and whether it’s included with the base policy or considered an option. Here’s what you should confirm:
- Water damage applies to sudden and accidental discharge which means it’s a major leak. The minimum amount of coverage I recommend is $15,000 or more if it fits your budget.
- Slow leak coverage is offered by a few carriers, but not all. It applies to leaks that take their time before you find them and is good coverage to have if available.
- Foundation coverage is really slab access and egress coverage and is invaluable. Even a minor leak can approach $15,000 so look at that amount of coverage or more.
- Sewage backup is almost always an option and should be considered, especially if you have hardwoods. The amount of coverage should match the amount of water damage coverage.
- Identity Theft is included on more and more quotes due to the string of hacks over the past few years. It’s a good option to have but confirm everyone includes it.
- Scheduled jewelry coverage is needed for any piece valued over $2,500 as this is the usual limit of most carriers. If you need this confirm everyone includes it in their quote.
Discounts: There are a variety of home insurance discounts including monitored alarm, auto / home, early quote, retired couple, gated community, first time home buyer, etc. Confirm each one contains the same discounts as much as possible.
Deductibles: Texas home insurance policies have at least 2 to 3 deductibles. There is the wind / hail, named storm or hurricane, and all other perils. Confirm they are the same, usually 1% for each one except along the coast where the named storm and wind / hail may be 2%.
Having each carrier provide quotes with the same levels of coverage, coverage type, discounts, and deductibles will enable you to accurately compare rates and make an informed decision. What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
