How To Buy Home Insurance Wisely: 5 Tips

Learning how to buy home insurance correctly will save you money on your monthly premiums as well as stress if you ever have a claim. You need home insurance because the vast majority of home owners will have a claim; in many cases, it is required by your lender. Home insurance will cover a few basic areas: property damage, liability if you are sued and living expenses if you have to live elsewhere due to a claim. When you are shopping for home insurance, consider these five tips to purchase the best plan.

Tip #1:  Determine How Much You Can Lose

If you poured every last dollar into your home's down payment, you can not afford to pay a claim out of pocket. Some homeowners will have substantial savings that will allow them to cover a number of small to medium claims. Choosing a high deductible and then paying small claims out of pocket will keep your premiums low. Racking up a high number of claims on your home insurance can also prompt your insurer to give notice of non-renewal. Home insurance is expensive and not easily available. If you can afford the high deductible, it will pay off.

Tip #2: Check Your Credit

It is safe to say you had above average credit when you secured your home loan. Your credit will come into play again in determining your insurance premiums. Watch your spending when you move into your new place. Many new home owners purchase furniture, appliances and other home products on a credit card. Carrying a high credit card balance can kill your credit. Do not start remodeling until you are certain you can secure and afford home owners insurance.

Tip #3:  Address Exclusions Appropriately

Do you live in Florida? Watch out for hurricane or flood exclusions. Do you live in California? You may face earthquake or fire exclusions. Exclusions will usually be listed at the end of your policy. They tell you about certain types of natural disasters you are not covered for. Exclusions typically occur because you live in an area with a high degree of claims for one type of accident or a high potential for disaster. Address these exclusions by purchasing a separate line of insurance for them. If you elect catastrophic coverage only, you will keep your premiums low but remain covered in a worse-case scenario.

Tip #4:  Look for Bundling Discounts

Many insurance companies will offer to bundle your home, auto and recreational vehicle insurance. You may be able to save money through bundling. If you have an established relationship with an insurance company, ask about how to buy home insurance through them as well. Remember: even $50 in premium a month on each of your insurance bills will add up.

Tip #5: Shop Around and Compare

Quotes are rarely locked in place. Use the tools at your disposal to shop around for options and ask for lower rates. For example, if you use a lender for your auto and small business lines, ask for a quote on home insurance. Compare this to quotes you find with other companies online. You may also get quotes from your bank or lender's home insurance division if they have one. Use these quotes to negotiate with your current company for the best possible monthly premium. If you have flexibility in your deductible, ask how raising the deductible will affect your monthly premium. There is always wiggle room in insurance rates if you are aggressive about your options.

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