As someone who has owned 19 homes over the last 40 years, I know from experience that the cost and coverage of insurance and the cost of taxes are very important to know about sooner rather than later in the buying process.
According to the Insurance Information Institute, it is important to factor in the potential insurance costs of the home you are considering because that will affect the overall price of owning the house for the long term, not just at closing time.
"When people look at homes, they tend to focus on factors such as property taxes, neighborhoods, school districts and available recreational and cultural opportunities," said Jeanne M. Salvatore, the senior vice president and consumer spokesperson for the I.I.I. "But an often overlooked cost factor is the insurance implications of a specific house."
Often new homeowners, and even experienced ones, will wait until right before closing on the home to order their homeowners insurance. Because there are several items that you should review, the importance of checking with your agent or company earlier in the process cannot be overstated.
WHEN LOOKING AT prospective new homes, here are a few questions to ask before signing a contract:
- How far is the home from the fire department? Houses protected by a fire department with a strong rating usually cost less to insure.
- What is the condition of the plumbing and electrical systems? Poorly maintained, unsafe and/or outdated systems can cost more to insure, not to mention repair.
- Is the home vulnerable to wind damage? Find out whether private insurance is available, or a state-run insurance program. Is there a windstorm deductible, and how high is it? A home on or near the beach might be more costly to insure than one inland. There are other considerations including the potential for tornadoes and thunderstorms packing hail and straight-line winds.
- Is the house at risk from flooding? Flood insurance is not provided under a standard homeowners insurance policy. However, it is available from the National Flood Insurance Program, which is serviced by private carriers, and from a few specialty insurers, and is backed by the federal government.
- What about earthquake risk? Earthquake insurance requires an endorsement or a separate policy, but across the Southeast it will more likely be an endorsement to your homeowner's policy with specific limits. Georgia, for instance, is exposed to about two quakes a year on average, according to the U.S. Geological Survey.
- Is the house well built and well maintained? Homes built by reputable builders using disaster resistant materials and designed to meet current building codes are likely to better withstand natural disasters.
- Another important consideration is liability insurance. If you have pets, it is important to talk with your insurance agent or company about adequate coverage. If you are buying a vacation home, this is a property where you should consider other liability risks too.
- One last thing. Property and casualty insurance to repair or replace your home, should something unpleasant happen, is based on the cost of demolition and rebuilding by a builder or remodeler. The market price of a home, which includes the building(s) and land, is not directly related to the square footage cost or other calculation for bringing the property to its original condition. Ask your insurance agent or company about these issues.
A KNOWLEDGEABLE home inspector and your insurance agent can be helpful in answering these questions. The size, location, construction and overall condition of the house can affect the cost, choice and availability of home insurance, noted I.I.I.'s Salvatore.
To educate consumers about the insurance implications of buying a home, the I.I.I. has created the Homebuyers Insurance Checklist. It provides information on what do before buying a house, factors to consider when looking at homes and placing a bid, and tips to properly insure your new home. To view the information on the Web, go to www2.iii.org/video/buying-a-home.html.
DAVID COLMANS IS THE EXECUTIVE DIRECTOR OF THE GEORGIA INSURANCE INFORMATION SERVICE. CONTACT HIM AT (770) 565-3806 OR DCOLMANS@GIIS.ORG.