I’ve been thinking a lot about creating a check list of home insurance related items for home buyers after last week’s post on why home buyers should check insurance on the new home during the option period. Here are three items home buyers should check that may help them save money on their insurance, as well as avoiding some unpleasant surprises.
Offer Acceptance: Once the offer is accepted, the first thing buyers should do is get insurance quotes on the new home. This is important for two reasons; so buyers know what the cost of the home insurance will be and the opportunity to review the CLUE report.
Knowing the cost of home insurance is enables buyers to budget accordingly. This is one of the best times to compare home and car insurance to see what savings are available. Buyers should review the cost of the insurance with their mortgage lender to confirm it is within acceptable levels with their mortgage ratios (see https://wiseinsurancegroup.com/home-insurance-mortgage-ratios/). If the cost is too high, compare other insurance providers and find a solution that’s within the ratios needed for loan underwriting.
Checking the CLUE report provides information on that may not be listed in the sellers disclosure on home insurance claims the seller filed within the last 3 or 5 years. Some companies factor only the buyer’s prior claims to determine the cost of insurance on the new home while others factor both the buyer’s and the seller’s prior claims when determining the rate on the policy (for more information see https://wiseinsurancegroup.com/check-home-insurance-in-the-option-period/).
Knowing if claims were filed is important; buyers are able to determine if they were repaired or not. For instance, if there was a claim for a water leak, buyers should find out what caused the water leak and was it properly repaired by a licensed plumber. The same goes for a hail claim – was the roof replaced or merely patched. Buyers should request copies of repair related documents such as receipts, etc. as these may be needed by the insurance underwriter.
Inspection: The home inspection should look at all claims to verify they were properly repaired in addition to the items they normally review. This is also an excellent time to look for updates to the roof, electrical, plumbing, and heating and cooling systems.
Note updates to wiring, electrical panels, water heaters, built in appliances, the furnace or heat pump, and air conditioning compressor. Find out when the roof was last replaced and what type of shingles were used. Updates in these areas may provide discounts on the new home insurance policy. Ask for documentation from the sellers as some may require documentation to submit to underwriting for acceptance. For more information on updates see https://wiseinsurancegroup.com/home-insurance-home-updates/.
Another item to examine during the inspection is whether the roof has more than one layer of shingles. Several carriers will write a two layer roof, however, no standard carrier will write a three layer roof. In addition, many carriers will not write a composition shingle over a wood shingle roof which makes it important to know what type of shingles were used for the base layer.
Checking these items out before the option period expires will prevent unwelcome surprises before closing and preventing a dream home from being a nightmare. Share your questions, comments, and experiences with me on my Google +, Facebook, and LinkedIn pages. I’d love to hear from you!