A home has traditionally been and still is the best single investment anyone will ever make and 72+ million Echo Boomers (Born 1977-1994) will soon be hitting the buyers market.
In Colorado the population increase is estimated to be 37% with 200,000 of these Boomers in Weld County. Frederick alone is slated to add 2000 homes. A home may be a single family dwelling, a condo, or a townhouse but its present and future value is so important that protecting it properly is a must. While there is many important disciplines involved in acquiring a home (Realtors®, Title Companies, Home inspectors, Mortgage Companies, Insurance Agents) usually the first contact the home buyer sees is the Realtor® who must have a general knowledge of each discipline in order to assist the buyer through the process and where to direct the buyer for assistance
Protecting this investment begins with insurance where many questions arise.
Here are the answers to the 10 MOST FREQUENTLY ASKED QUESTIONS ABOUT HOMEOWNER’S INSURANCE.
1. HOW MUCH TO THE PURCHASE DO YOU NEED TO INSURE?
Land does not need to be insured! (except for liability) but the full replacement value of the dwelling should be covered in ease of a total loss: i.e. fire, wind, etc… An insurance agent, builder, or an appraiser can assist in doing this.
2. DOES CONSTRUCTION MAKE A DIFFERENCE IN COST?
Yes. Masonry/brick construction is generally a little higher in building cost than Frame but is usually a little cheaper to insure. Some other items that add to Replacement cost is fireplaces, central air, finished basement, type and quality of Construction.
3. DO DIFFERENT AREAS MAKE A DIFFERENCE IN INSURANCE COSTS?
Yes. The fire department (full time or volunteer) can make a difference as does the proximity to a fire hydrant. Some other factors insurance companies consider are High loss areas such as wind, hail, tornado, etc. Choosing a higher deductible can help keep rates lower.
4. ARE CONDOS & TOWNHOUSES DIFFERENT?
Sometimes. If there is a “blanket” insurance policy on the building then the buyer need only obtain contents insurance which includes personal liability and loss of use.
If there is no blanket then a regular homeowner’s policy is recommended.
5. WHAT IS NEEDED AT CLOSING FOR INSURANCE?
An evidence of insurance with an invoice if the mortgage company is going to collect the premium at closing or a certificate of insurance showing paid if the buyer has paid in advance. I’hc insurance agent will take care of this for the buyer.
6. WHAT DO INSURANCE COMPANIES LOOK FOR IN INSURABILITY?
Many factors arc considered in underwriting a residential risk. Primary considerations are condition and age of the structure, wiring and plumbing and liability hazards.
The initial inspection is done by the insurance agent but may be followed up by a separate roofing inspector. Neither of these should preclude the buyer from hiring a pre purchase home inspection company as the two arc somewhat different.
7. DOES THE BUYER NEED FLOOD INSURANCE?
If the house is in a high flood zone the mortgage company will require flood insurance. If not, the buyer can opt to purchase a policy for their own comfort.
The insurance agent can determine the cost once the flood zone has been established.
8. ARE DWELLING, CONTENTS, AND LIABILITY COVERAGES PURCHASED SEPARATELY?
Generally not. The homeowner’s policy is a package that covers all the above plus detached structures, loss of use, and many other coverages and options. Even on townhouse and condominium owner policies some dwelling coverage is automatic with the policy and depending on the type of “blanket” insurance more may need to be purchased.
9. IS THE HOME BUYER REQUIRED TO PURCHASE MORTGAGE INSURANCE?
There are certain types of government backed mortgages that require “mortgage” insurance to be purchased. The mortgage company or mortgage broker will be able to advise the buyer on this. Mortgage “life” insurance is not required except in certain circumstances. However, many conscientious home buyers do purchase this life insurance to protect their families in case of premature death.
10. SHOULD THE AGENT MAKE PERSONAL CONTACT WITH THE HOME BUYER?
Absolutely. While the Realtor and/or the Mortgage Company can provide the agent with many needed details each policy needs to be tailored to the individual homeowner. There are over 20 options and endorsements that can be added for specific needs and it is very important to explain the limits and exclusions.
Cliff Daniels
Realtor
Active Properties
Boulder Colorado
720 434 1418
cliff@actprop.com
