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  Tuesday, October 21, 2014  
   
 

 
Insurance
protecting your investment

You are about to close on your new home. Everything is so close that you have already started to pick out colors to paint your new bathroom. Before you pick up paint swatches there is a more important issue at hand—insurance. With new home ownership comes many decisions. You know that this is one of the largest investments you are likely to make. What you need to know is how to properly insure your investment.

There are many important insurance decisions that need to be made before you actually close on your new home. The insurance questions begin with title insurance, go on to homeowners insurance and end somewhere between an umbrella policy and flood insurance. The best idea is to talk to an insurance agent and see which types of insurance are best for your new home, but here are some basics on a few of the insurance options available to new home owners.

Title insurance is a little-talked-about type of insurance that in most cases is never needed, but in the off chance that it is, it is worth its weight in gold. When you buy a house it’s yours, right? Well, not always. What title insurance does is protect a homebuyer when the “not always” happens.

No matter how thoroughly a property’s title is researched there are certain circumstances that even the best researcher cannot guarantee against. These circumstances include:

  • If the seller is falsely impersonating the true owner of the property.
  • If there is a forged deed, releases, or wills. Or when the transaction is executed under invalid or expired power of attorney.
  • If there is an undisclosed or missing heir to the property, which can come from mistakes in recording legal documents.
  • If there is a misinterpretation of a will or deed by a person of unsound mind.
  • If it is deeded by a minor.
  • If it is deeded by persons purported to be single, but in fact married.
  • If it is fraudulently deeded.
  • Or if there are liens against the property for an unpaid estate, inheritance, or taxes.

What title insurance will do in these circumstances is pay to defend against any lawsuits and either clear up the title problems or pay the insured person’s losses. One of the beauties of title insurance is that for a one-time premium the insurance policy will remain in effect as long as the owner, or their heirs, have an interest in the property. In short, title insurance provides certain safeguards so the homeowner will know that their investment in their home is a safe one.

Peace of mind can also be provided through homeowners insurance. Basic homeowner’s insurance will safeguard against:

  • Property damage coverage protects your home and/or belongings if they are damaged or destroyed (can be limited to certain causes).
  • Liability Coverage will pay if you are responsible for another person being injured or their property damaged.
  • Medical payments coverage will pay for medical treatment for individuals injured in an accident in your home, and in certain circumstances away from your home, whether or not you are at fault.
  • Additional living expenses coverage will pay for you to move into a temporary residence, be it a motel or an apartment, and will cover certain other additional living expenses when you cannot live in your home because of damage that is covered within your policy.

Years ago when individuals purchased property damage coverage they solely purchased fire coverage. Later, insurance companies began to offer coverage for loss from other causes, such as windstorms, hail, vandalism, and theft. These types of insurance policies are referred to as “named peril” policies. This means that they only cover against the types of loss that are specifically named. There is a second type of property damage coverage that is a little more open in its coverage. An “open peril” policy will cover any damage or loss from conditions that are not specifically excluded in the policy. There is no insurance policy that will cover every possible cause of property damage or loss. For example, no insurance policy covers against nuclear accidents or acts of war.

Another aspect of most home insurance policies is liability coverage. What this does is cover the homeowner, or their immediate family members, if they are at fault for injury to another person or their property. The interesting thing about liability coverage in your homeowners policy is that it protects you and your family wherever an accident occurs, even if it is not on your property. If the damage or injury requires legal representation, liability coverage will typically cover that as well. There are limits on how much liability coverage comes with a particular property, so for some individuals it may be necessary to purchase an umbrella policy to provide additional coverage.

Within the liability section of your homeowners insurance is also a specified amount for medical payments coverage. The way medical payments coverage is different from liability coverage is that liability only works when the homeowner is at fault. Medical payments coverage will pay doctors’ bills for injuries gained on your property regardless of fault.

Another important aspect of homeowners insurance is the coverage for additional living expenses. If a peril that is covered by your insurance is to take place that requires you to find temporary living quarters, be it a motel or apartment, the insurance company will pay reasonable and necessary additional living expenses. The amount they will pay is dependent upon how high of a policy you have. These temporary living expenses will only be reimbursed if you have additional living expenses, if you move in with a friend or a relative there will be no reimbursement.

Other things that are covered in your homeowners insurance include personal property, outbuildings, trees, shrubs, plants, and debris removal. There are separate types of insurance policies needed for mobile homes, farms or ranches, and for flood insurance. It is important that you speak with an insurance representative to determine which type of insurance is best for you.

Tips to Remember When Buying an Insurance Policy

  • Answer all of the questions on the application fully and accurately.
  • Do not sign a blank insurance application.
  • Do not pay your insurance agent with cash; always make sure to pay by check to the insurance company.
  • If your insurance application is denied, ask for an explanation.
  • Do not choose your policy on price alone; make sure you consider the type of coverage you are purchasing and the service you will receive.
  • Ask your insurance agent about discounts for certain safety and security devices.
  • Ask your agent about discounts for new homes and
  • multi-policies.
  • Look at the differences in price between the “named peril” and “open peril” policies.
  • Check that your dwelling policy limits are at least 80% of the replacement costs of your home. This can be based upon a recent appraisal or your agent can help you determine the cost of replacement.
  • Look to see if the company offers an inflation guard endorsement.
  • Ask your agent if you should list certain valuable items of personal property on your policy.
  • Examine the differences in price for basic liability coverage and higher levels of coverage.
  • Check to see if your agent charges any additional fees over and above his or her commission. These fees may be for services such as photocopying, faxing, and mailing.