5 Tips for First-Time Homeowners Worried About Insurance

Posted On Friday, 08 October 2021 12:53

Buying a home is no small accomplishment in today’s real estate market. You’ve scrimped and saved for a down payment for years, and now you can finally say you’re the proud owner of your own home. And now you have to protect your investment with insurance.

You may not be able to prevent a house fire, but your home insurance policy should protect you from the financial fallout. The money you receive from a fire insurance claim helps you rebuild your home, replace the belongings lost to the fire, and cover additional living expenses when you can’t stay at home.

You’re not alone if you’re worried about your home insurance policy. Follow these tips to review your policy and confirm that you have enough coverage if anything were to happen.

#1 Know When to Get Help

One of the best fire insurance claims tips you can get is knowing when to get help. When it comes to minor claims, you can probably handle it on your own, but if the damage is substantial, you will almost certainly want help from someone who understands insurance claims and how to negotiate with your provider.

In a significant or total loss, disagreements with your insurer can be devastating, but you don’t have to accept it without a fight. Getting help negotiating with the insurer and the adjuster can be well worth it.

#2 Don’t Let Yourself Become Underinsured

When you’re underinsured, you don’t have enough coverage to pay for the costs of rebuilding your home, repairing damage, or replacing lost belongings. Your coverage limits are significantly below the replacement costs you would face.

Most insurance companies use what’s commonly known as an 80% co-insurance clause in their policies. This clause says that if the policy covers less than 80% of the value of the property, the amount paid in a claim will be proportional to the insured amount.

It’s important to have up-to-date assessments when you get your insurance. Building costs have risen rapidly in the past few years, both in terms of labor and construction materials. Even if your policy has an inflation guard, it’s entirely possible that costs to rebuild your home have outpaced those protections.

There’s also a difference between the replacement cost and market value of your home. You don’t need to insure the amount that you paid for your home, but rather the estimated rebuilding costs. In many real estate markets today, that will be a relief to homeowners.

#3 Start Keeping Every Receipt

Should you ever have to make an insurance claim, you can make your life easier by having receipts, pictures, and proof of payment for lost belongings. Keep them organized in a binder or organize them digitally and use cloud storage like Google Drive so that you can retrieve them from anywhere, any time. 

When you make an insurance claim for lost contents, you may have to provide information like this to the insurance adjuster. Keep receipts for things like:

  • Clothing
  • Electronics
  • Furniture
  • Children’s toys
  • Tools
  • Valuables
  • Large quantities of dry or frozen food

#4 Report Your Renovations and Repairs

Buying an older home often comes with a long list of renovations or repairs you’ll have to make within the first few years of moving in. Especially in today’s market, buying a fixer-upper can make a mortgage more attainable, and older homes may be in need of extensive renovations.

Communicating with your insurer about renovations and additions is essential to avoid problems when you make an insurance claim. The changes you make can be expensive. Installing new floors, renovating the kitchen or bathroom, or updating the appliances can all significantly change the replacement costs of your home. In addition, if you fail to inform your insurer of a renovation or upgrade, they might deny coverage.

The changes may mean higher premiums, but if the house is in rough shape when you purchase it, there are some renovations that can actually lead to lower premiums. Replacing your roof, updating the wiring, installing new plumbing, and adding a sump pump to prevent flooding damage can all lead to lower premiums.

Keeping an up-to-date policy is an important part of protecting your investment. 

#5 Save an Emergency Fund for Your Deductible

Many newer homeowners had to do everything they could to get their mortgage. It has left many in a vulnerable financial position and without much in the way of savings.

One of your top financial priorities should be saving an emergency fund that can cover your deductible and any immediate expenses that you may not be able to get reimbursed until later. You pay the deductible before the insurance money kicks in, so consider it a minimum expense if something happens. You may also have to cover any costs that go beyond your coverage limits.

As a new homeowner, insurance doesn’t have to be scary. It should give you the confidence that your home is protected, no matter what.

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