What You Should Know as a First Time Home Buyer
My wife and I are about to begin searching for our first home. With this new season approaching, I’ve started to think about what things I need to understand to be the most prepared for this large decision, especially in this very competitive housing market. One of the things to understand is what about the home you’re looking at could hurt or help your home insurance. Here are my top 5 things that can change your insurance:
1. Credit Score
I know this one doesn’t exactly deal with the home you’re looking at, but this is a huge factor! If you don’t have the best credit score, there is a good chance you could see a higher home premium, and most likely even a higher interest rate on your loan. For the same house, and same exact policy, two people could have very different premiums simply based upon their credict score. So, before you go out house shopping, check your credit score to know where you stand.
2. Zip Code
The zip code the home is located in has a large effect on the rating of the home premium. The main reason for this is risk exposure. Risk exposure for zip codes relates to a few things such as crime rate, if there is a fire department in the xip code, claim frequency in the zip code, and accessibility. Indianapolis, outside of what is considered ‘downtown’ has a pretty competitive rate. However, when you start to move towards downtown you’ll see premiums rise because crime is usually higher, and there are more claims because there are simply more people. However, if you move far away from the city you could also see a rise in premium because the police department and fire department are usually farther away, and homes are more difficult to get to because of rough roads, heavilty forested areas, and longer distances. So, research the zip code you’re looking at to make sure it will benefit you.
3. Home Construction
When you’re considering purchasing a home, make sure you know the contruction type. There are three main constructions, only two of which are used in today’s homes. They are frame, brick veneer, and brick. Frame is going to be the most expensive to insure, because it is the most exposed to loss – it is not as stable during earquakes, it burns quicker, and rots easier. Brick veneer is second best, as it helps slow down fire, and is more stable. However, solid brick is the top type as it burns extremely slow, if at all, and withstands high winds and vibrations extremely well. Unfortunately, solid brick is no longer used.
Basements are great spaces to entertain, relax and store things. However, they also increase your home premium. Even so, this is the foundation I’ll be looking for as it adds another level of flexibility to your home. However, basements do add some extra expense to your premium. They add another room for insurance to cover, are the most common places for water claims, and can present the perfect environment for mold and mildew to grow. If you’re looking for a home to cut down on insurance premiums, look for one that has a slab foundation. However, be very precise when inspecting the foundation, as cracks can cause serious headaches down the road.
5. Updates to the Home
Updates done to the home are probably the best place to try and save on your home premium. When shopping for a new home, take the time to find out when the following items were last replaced: roof, plumbing, electrical wiring and panels, HVAC, and security systems such as locks and windows. Having original electrical wiring can actually make the home almost uninsurable as most companies would not even offer a quote. If you hear the terms aluminum wiring, tube wiring, or cloth coating, don’t buy the house. These are extremely susceptible to fire and are not very good at conducting electricity which will increase your utility bills. If the roof is more than 20 years old, you may want to walk away as well. Old roofs are becoming much more expensive to insure, and in some cases, force you to only insure them on an actual cash value basis (the cost to replace the roof minus depreciation).
6. Extra Credit
If you want to get a better feel for the home you’re looking at purchasing, do the following:
- Sit outside the home for at least 30 minutes in the morning and evening to see how your neighbors would be.
- Go see the house after a heavy rain to see if water collects near the foundation, or drips in through the roof.
- Look for suspicious selling actions such as having too many candles which could mean a bad smell is present.
If you’re unsure if you have adequate coverage, or how a new home would affect your home premiums, give us a call!