Homeowner's insurance FAQ.
If you’re considering the costs of homeownership, be sure to factor in the required homeowner's insurance premium. This will be mandatory when you’re approved for a mortgage.
Homeowner's insurance can help pay for more than damages caused by storms, fires, or floods. It may also cover:
- Replacing some or all of your home’s contents.
- Your legal liability if someone’s injured while on or in your property.
- Detached buildings like garages and workshops.
- Living expenses, if your home receives major damage or is totally destroyed and is uninhabitable.
Since the cost of insurance will be affected by several factors, we’ve prepared the following questions and answers.
How much coverage do I need?
Ultimately, this will depend on your own comfort level. While your lender will explain your minimum coverage requirement, you can top this up. Generally, there are three types of coverage:
- Actual cash value: This covers your home, plus your belongings after your insurer determines its current worth, or depreciated value.
- Replacement cost: If you don’t like the idea of paying extra for replacing belongings, this option covers the actual cash value of your home and possessions without deduction for depreciation.
- Guaranteed (or extended) replacement cost/value: This pays for whatever it costs to repair or rebuild your home, even if it adds up to more than your policy limit. If rising real estate costs concern you, this may be coverage worth considering.
What do I need to provide my insurer?
Make a list of all possessions in your home. This inventory should include as much detail as possible, so include sales receipts, purchase contracts, and appraisals if you have them.
• Start with big-ticket items such as jewelry, artwork, and collectibles.
• Go through every room of your current home, even if you haven’t yet moved.
• Take pictures of important items and store with descriptions. A video walk-through of your entire home can improve your inventory’s accuracy.
• Save your inventory list, photos, and any video on your computer, with backups on another computer, cloud storage, or in a safe deposit box.
What factors affect pricing?
The following can increase the price of your insurance:
- Your home’s age, type of structure, wiring, roof, and other features.
- Your home’s location. This may include proximity to a police or fire station, exposure to extreme weather or wildfires, and theft-prone neighborhoods.
- Smokers may pay more since the chances of an accidental fire are greater.
- If you’ve never had previous insurance, have a gap in your insurance history, or if you’ve ever had coverage cancelled for non-payment.
Here’s the good news — there are several ways you can reduce your premium now or when it’s up for renewal. Here they are:
Combining coverage: By purchasing your homeowner's and auto insurance from the same provider, you’ll be entitled to a “bundled discount.”
Raising your deductible: Like your auto insurance’s deductible, increasing the amount you’ll pay toward a claim before your coverage kicks in will lower your costs. However, setting it too high can result in cash flow problems.
Increasing your safety: Burglar alarms, smoke detectors, fire extinguishers, sprinkler systems, and deadbolt locks can lower your premium.
Improving your credit score: Most insurance providers use this number as an indicator of how likely you are to file a claim.
How do I pay for my coverage?
There are two ways to pay. Although you may pay each year’s premium directly to your insurance company, most homebuyers opt for an escrow account. This means your monthly mortgage payment will include 1/12th of your annual homeowner's premium, and your lender will make your annual premium payment on your behalf.
Contact a KBHS loan officer today for fast, friendly assistance with your home financing needs.
KBHS does not offer homeowner's insurance products.