Shopping for homeowner’s insurance is a must! The pricing varies depending on the carrier.
The premium is the amount you pay for coverage. The deductible is what you will pay in the event of a claim before the insurance company will pay the rest. In general, premiums and deductibles have an inverse relationship. Therefore, you can lower your premium by raising your deductible. To properly comparison shop, make sure you use the same coverage/deductible amounts with each insurance agent.
Insurance premiums can be paid through your escrow account held by your lender or can be paid directly by you to the insurance company.
In general, agents will request the following information about the home in order to give you an accurate quote: Square footage, year built, construction type (i.e. cinder block, frame/stick built etc), pool/no pool, type of roof (i.e. hip, flat, etc.), age of roof, fence/no fence, wind mitigation report (if inspection completed), flood zone information, distance to fire hydrants.
Be prepared pay one year’s premium prior to closing (some lenders require proof of payment of one year’s premium before issuing a loan commitment letter). In addition, lenders have required 2 to 3 months escrow at closing. This is especially true with FHA and VA loans.
Flood insurance is a separate policy from homeowner’s insurance. It covers the home from damage from rising waters. If your home is in a high-risk flood zone your lender may also require you to have flood insurance. Keep in mind that it does not become effective until 30 days after you purchase it.
Homeowner’s Insurance usually protects against losses from damage to home and personal property. Read your policy carefully so you understand exclusions or exemptions. Certain home attributes may lower premiums, such as burglar alarm system, gated community, fire suppression system, smoke alarms, wind mitigation report. It is also a good idea to have an inventory of home furnishings and fixtures in case of loss. A folder with copies of receipts and/or pictures, descriptions, and original cost will be invaluable if they are lost or damaged.
Hurricane Season (and they say we have no seasons in Florida!) runs from June 1 through November 30. If the home you are purchasing is within a few days’ striking distance of a storm, insurance companies will suspend issuing insurance in that area until the danger has passed, which may also delay your closing. So if moving in by a certain time is important, make sure you secure insurance coverage well before closing during Hurricane Season to prevent any delays.
A Wind Mitigation Report is a report by a certified inspector of the home’s ability to withstand hurricane winds/flying debris. It includes openings (windows and doors), roof (type and condition), and construction (block/modular/frame) among other things. The certification is usually good for 5 years and is the property of the homeowner. The higher your level of wind protection, the lower your insurance premium will be, so make sure you have a copy of it handy whenever you shop for insurance. The $75-$100 (as of writing) you spend on that inspection will probably be the best money you have ever spent, as it may save you thousands in yearly premiums.
Keep in mind: Just because your premium is paid by your lender’s escrow account it is still YOUR policy. Feel free to shop for a better price at any time. If you find a better deal, take it, and give the information to your lender’s loan servicing department as well as the previous carrier so they can cancel your policy and refund any premiums paid past the cancellation date.