Before you buy a home, you should talk with your insurance agent to see how much coverage will cost. Consider this advice from a local expert and plan ahead.
Your home may be the biggest investment you ever make, so you naturally want to protect it. Insuring your home will require some strategic planning, so we asked Red Rock Insurance agent John Lipscomb a few common questions:
How much should I budget for home insurance?
As with taxes, association fees, and other annual costs, you should factor a home’s insurance into your budget. While you’re looking at a home, you can reach out to your insurance agent to estimate the home’s yearly cost. With the home’s address and basic information, they can determine a quote in advance.
“Insurance coverage costs can be influenced by several factors,” says Lipscomb. “Among these factors are the age of the home, the location of the home, the size of the home, and the improvements to the home.”
When the agent has considered all the factors involved, you can form a plan with the cost in mind. “Knowing the insurance cost ahead of time will allow you to establish a monthly budget for home insurance before you make your final purchase decision,” says Lipscomb. “Generally the monthly insurance expense is added to your monthly mortgage payment that is collect by your mortgage servicer or bank.”
Why would insurance coverage be more than I paid for the home?
The standard Homeowners (HO3) policy makes the insured whole again in the event that the home is struck by a covered disaster. This may be different than the initial sale price. “Rebuilding of a home is based on the cost of that home in today’s market,” says Lipscomb, “not necessarily on the purchase price or current value of the home.”
Let’s say you purchase a home for $150,000, but the insurance reconstruction models indicate a reconstruction cost of $200,000. “If the home was a total loss, then it would be necessary to carry coverage for $200,000,” says Lipscomb. “Insuring the home for less would not allow adequate coverage to rebuild and make the insured whole.”
If you’re buying an older home, Lipscomb suggests to be mindful of outdated building standards. “You may want to be sure your policy has adequate coverage to meet the most up-to-date building codes,” he says.
If you have any questions about home insurance, you can reach Lipscomb at firstname.lastname@example.org. When you need to finance a home, we’re here to help.