Boston area insurance experts report many first time homeowners find buying home insurance more than a little intimidating. Insurance professionals recommend prospective buyers consider a few common questions before they begin shopping for coverage. Doing so may give first time buyers a better understanding of Boston area insurance and a greater comfort level as they discuss their insurance needs.
Boston Area Insurance – Some Q&A
Let’s examine some frequently asked questions from first time home buyers.
Am I required to get insurance prior to buying a home?
Some may find this surprising, but the answer is actually, no. While most states require drivers to have auto insurance coverage on a newly-purchased vehicle, that’s not the case with a home. The big exception, of course, is if you are taking out a mortgage loan to purchase your home, the lender will almost always require home insurance coverage in at least the amount of the mortgage to protect the collateral.
What type of coverage is included?
Most standard home insurance policies generally cover the structure of the home, its contents (furnishings, appliances and personal items,) other structures on the property, and additional living expenses. Here’s a closer look at each:
The Structure: In the event your home is damaged or totally destroyed by a fire or other covered peril, your insurance policy will cover most of the expenses required to repair or re-construct the house. Keep in mind, the coverage of your structure isn’t necessarily the same as the amount your home cost when you bought it. Most Boston area insurance experts recommend having structure coverage in an amount required to completely rebuild your home in the event of a total loss.
The Contents: Contents coverage applies to your personal possessions in the home. This portion of your insurance policy is activated if your belongings are damaged or destroyed by a covered peril, such as a fire. A word of caution, however, if you own items of higher value like expensive jewelry, rare antiques or a valuable art collection, most insurance policies contain a maximum – or cap – on the repair or replacement value of those items. Typically, the cap is $1,000-$2,000. Most Boston area insurance companies can add a rider to your existing policy to increase the coverage amount for your higher-valued possessions.
Liability Coverage: Liability coverage is the part of your home insurance that can help pay for medical, rehabilitation, or funeral expenses if a person is injured while on your covered property. In addition, if the injured party sues you that coverage can help pay for the costs associated with the lawsuit – and its consequences.
Although coverage amounts vary, typical liability coverage limits are $100,000. According to Boston area insurance professionals you should consider setting coverage limits between $300,000 and $500,000. This is especially true if your home features what lawyers term “attractive nuisances,” such as a swimming pool, a trampoline or a swing set. Because these items are often responsible for home injuries, increasing coverage limits is recommended since today’s medical and legal costs can mount quickly.
Other Structures: Additional structures on your property such as a detached garage, tool shed, workshop or children’s playhouse are covered in the event of damage or loss by a covered peril. This portion of your policy would help pay to repair or reconstruct the structures.
Additional Living Expenses: Should your home be destroyed by a covered peril, this coverage can help pay for living expenses like hotel accommodations and food expenses for the amount of time you’re displaced from your home. It is highly recommended you discuss this with your insurance company to understand the limits of coverage. Most policies limit the amount of time you and your family would be covered.
What are covered perils?
Standard Boston area insurance policies cover damage as a result of fire, hail, lightning, windstorms, theft, vandalism, explosions, and riots. In addition, water damage from frozen, burst, or leaking pipes is usually covered. Remember, damage caused by earthquakes or floods is not covered. Those natural disasters require separate policies for each specific coverage.
How much coverage do I need?
The best way to make sure you have enough coverage is to take a complete inventory of your home. Make a list of everything you own and the value of each item. It’s best to have a photo or video file of your possessions and, if possible, include the receipts or other proof showing the amount you paid for them. Make several copies of the inventory list and keep them in various safe locations like a bank safe deposit box, a personal file in your office, or at the home of a relative. Meet with your insurance company and review the list with your agent. They will best determine the amount of coverage you need.
What determines my premium?
The cost of your Boston area insurance policy is determined by these factors:
- Your credit score
- Your claims history (both personally and the history for the area in which you live)
- Your home’s location
- Your home’s age
- Costs to rebuild your home
- Your home’s proximity to a fire hydrant or fire department
- Whether you own pets or not. For example, owning a dog – especially certain breeds – may require additional liability coverage
- The types of coverage you choose
How can I save money on my premiums?
Consider these money-saving ideas:
- Discounts. There are discounts available. Having your home and auto insurance with the same company can often earn a discount. Having home safety features such as security systems or smoke alarms can also save money.
- Raise the deductible. Your deductible is the amount of money you have to pay out of pocket on a claim before your insurance begins to pay. Increasing the deductible will save money on your premium. Be careful, however, that you don’t create a financial hardship if you have a claim by having your deductible too high.
- Increase your credit score. Insurance companies use statistics citing your credit score as an indicator of how likely you are to file an insurance claim. Do what you can to improve your credit score. Increasing your score can decrease premium payments.
How do I select a company?
Like most large purchases, we suggest you shop around. Most Boston area insurance companies offer different coverage terms and costs. Get quotes from several companies and compare what each covers and what it costs.
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