Buying a home, even in these times, can be a great investment. At the very least, you’ll get tax benefits from the purchase. Plus, you can stop paying hundreds of dollars every month for rent and having nothing to show for it except a place to camp out every night.
When you buy a home, those monthly mortgage payments build equity that – as long as there’s not another housing crisis – won’t go away.
But with a mortgage will come a requirement that you didn’t have as a renter: Your lender will require you to buy a home insurance policy before you close on your loan. But that’s not such a big deal. That’s because there are a number of ways you can keep control over how much you spend. Consider the following tips for reducing your premiums:
Shop your policy with several providers
You wouldn’t buy a television from the first store you visited. You’d comparison shop, get the best deal for the size of the set and resolution you want, as well as any extra features such as wi-fi. Similarly, you shouldn’t just blindly accept a recommendation on a home insurance provider. Get several homeowners insurance quotes before deciding on a policy.
However, make sure when you compare quotes that you’re using the same criteria. A standard home insurance policy typically includes six types of coverage: dwelling, other structures, personal property and contents, loss of use, personal liability and medical payments. Dwelling coverage is the one that usually comes to mind when you’re thinking about home insurance: It’s the part of policy that pays to repair or rebuild your home if it is damaged by a covered event. You should have enough dwelling coverage to equal the replacement cost of your home.
Different carriers can have widely varying quotes despite being given the same information, so make sure you’re getting a right price on your coverage before you commit to a policy.
Bundle your home and auto coverage
If you buy television, telephone and Internet service at a discount from the same provider, you’ve gotten a preview of how this works. You can save up to 20% on your premium by bundling your home and auto insurance with the same provider. Most carriers offer both coverages, so why not take advantage of this price break? Plus, you’ll gain the convenience of working with one carrier whenever there’s a problem.
Pay attention to your credit score
This helps you in so many ways. For one thing, you’ll likely get a better mortgage rate in the first place if you’ve maintained a good credit score. You’ll also get better home insurance rates, because providers use your credit score to evaluate your risk as a customer. They like the stability demonstrated by those with good scores. Make payments on time, and keep an eye on your debt/income ratio.
Don’t be caught off guard by flood insurance
Most people want to know about school zones and property taxes when they’re looking for a house. But expand your checklist to include finding out whether the house you’re looking at is in a flood zone. Flood insurance typically isn’t part of standard home insurance policies. Even if you’re not in a flood zone, you’ll likely want coverage, but it won’t cost as much if the risk isn’t as great. Policies range from as little as $130 a year for the lowest risks to nearly $7,200 a year for $250,000 of dwelling coverage in high-risk areas.
Don’t discount the discounts
Most carriers offer discounts for their premiums. Make sure you ask your agent if you’re getting every price break you’re entitled to receive. Among the discounts are the following:
• New home. If your home has been built in the past 10 years, you could save up to 20%.
• Nonsmoker. If no one in the household smokes cigarettes or other tobacco products, you could save up to 20%.
• Alarm system. You could save up to 10% if you have a burglar alarm.
• Deadbolt locks. Having deadbolt locks could reap up to a 5% break.
Buying a home will never be cheap. But you can save on insuring it if you go into the process with a little knowledge and your eyes wide open.