Home buying and homeowner's insurance
Just a few years ago, it was a very simple thing to line up homeowners' insurance on short notice in Charleston - just before going to closing.
Today, in the nervous post-Katrina insurance world, insurance companies are much more careful about how they issue policies. Insurance companies today have become very sensitive to what they call, "probable maximum loss."
It is not unusual now for companies to limit the number of policies they issue in certain areas, place more restrictive maximums and minimums on policies, and take other actions to reduce their risk of exposure. They are careful about where they offer policies and how his policies are structured. As a result, it just takes longer than before to get your insurance for your new home.
Many outstanding insurance companies offer homeowners' insurance in the Charleston area. If you start early, you should have no problem obtaining homeowners' insurance. Failing to have your homeowners' insurance lined up in advance will delay your closing.
As a home buyer, it is a good idea to line up your insurance company even before you are sure about which home you will be buy
ing. Of course, the insurance company cannot move forward with issuing a policy until you buy the home; but, they can give you an idea about coverage costs and coverage availability. Shop around and be sure you're getting the very best deal.
Your insurance agent can provide you with the information you need on suggested coverage levels. Discuss deductibles with your agent and make sure that you are paying for only what you want. Many people find that, by raising their deductible, they can reduce their insurance costs substantially. Ask your insurance agent about that.
In the Charleston South Carolina area, insurance costs vary depending on how close you are to the coast.
The areas that are close to the water or east of Highway 17 A, will pay more for certain types of homeowners' insurance - such as wind and hail damage coverage. Flood insurance may also be required. (your insurance agent can tell you whether or not a certain home will require flood insurance).
Not every insurance company offers homeowners’ insurance in the Charleston area. Some companies that offer homeowners' insurance in the Charleston area do not offer homeowners’ insurance in every part of the Charleston area.
Most people will not make a buying decision based on insurance costs. However, interestingly enough, many people do make buying decisions based on differences in taxes on properties (I am often asked about which county has the lowest taxes). Insurance cost differences are often more dramatic than differences in property taxes from one part of the greater Charleston area to another. While everyone expects homeowners’ insurance and taxes to be more for more expensive homes, few people factor in the location of the home when considering the impact of homeowners’ insurance costs.
If the cost of insurance is important to you, speak with your insurance representative to get some ideas about the difference in the cost to insure similar homes in different areas of town. Location makes a difference.
Money Saving Tips:
- Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
- Ask your insurance agent about discounts. You may be able to get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire retardant roofing material. Persons over 55 years of age or long-term customers may also be offered discounts.
- Insure your house NOT the land under it. After a disaster, the land is still there. If you don't subtract the value of the land when deciding how much homeowner's insurance to buy, you will pay more than you should.
- Don't wait till you have a loss to find out if you have the right type and amount of insurance.
- Make certain you purchase enough coverage to replace what is insured. "Replacement" coverage gives you the money to rebuild your home and replace its contents. An "Actual Cash Value" policy is cheaper but pays only what your property is worth at the time of loss-your cost minus depreciation for age and wear.
- Ask about special coverage you might need. You may have to pay extra for computers, cameras, jewelry, art, antiques, musical instruments, stamp collections, etc.
- Remember that flood and earthquake damage are not covered by a standard homeowners policy. The cost of a separate earthquake policy will depend on the likelihood of earthquakes in your area. Homeowners who live in areas prone to flooding should take advantage of the National Flood Insurance Program. Both flood insurance and earthquake insurance are good to have in Charleston.
- If you are a renter, do not assume your landlord carries insurance on your personal belongings. Purchase a separate policy for renters.
Other considerations:
1. Know about exclusions to coverage. For example, most insurance policies do not cover flood or earthquake damage as a standard item. These types of coverage must be bought separately.
2. Know about dollar limitations on claims. Even if you are covered for a risk, there may be a limit on how much the insurer will pay. For example, many policies limit the amount paid for stolen jewelry unless items are insured separately.
3. Know the replacement cost. If your home is destroyed you’ll receive money to replace it only to the maximum of your coverage, so be sure your insurance is sufficient. This means that if your home is insured for $150,000 and it costs $180,000 to replace it, you’ll only receive $150,000.
4. Know the actual cash value. If you chose not to replace your home when it’s destroyed, you’ll receive replacement cost, less depreciation. This is called actual cash value.
5. Know the liability. Generally your homeowner’s insurance covers you for accidents that happen to other people on your property, including medical care, court costs, and awards by the court. However, there is usually an upper limit to the amount of coverage provided. Be sure that it’s sufficient if you have significant assets.
