Some people are surprised by the cost of home insurance and are undoubtedly confused when they have to pay as much for their home which is valued at 70,000 to a home which is valued at 170,000. The perception that since a home in a lower priced real estate neighborhood may be as bought at 70,000, is that home insurance rates should be lower than a similar home bought in a higher priced neighborhood for 170,000. The fact is that home insurance is determined on replacement value. If both homes are determined by the insurance agent after he has taken measurements and visited the house, would take 250,000 to replace then you would be buying home insurance for 250,000.
If you are getting a mortgage, you really have no choice in the matter since the mortgage holder, whether a bank or other means of credit, would add the cost of home insurance to your monthly mortgage payment or ask that you provide your own home insurance and document your insurance coverage with them. It is really a very foolish person who would pay cash for a house and not buy home insurance.
Outside of covering the replacement value of the home, you should ask to see if you have coverage for damage or theft in areas like your garage, drive way and property. Some people assume that their home insurance covers all of these areas and if you don’t ask you won’t know. Home insurance rates are based on the replacement cost of the home and the extra coverage that you decide with your insurance agent that you want.
If you have car insurance and the company also sells home insurance, you will get a better rate if you get a package insurance policy with them. Car and home insurance policies are normal and are cheaper than getting two policies from two different companies.
In some areas, you might be asked to get flood insurance for your home. Most normal home insurance companies do not offer flood insurance if you live near the water. Those policies are sold by flood insurance companies if you can get them. Your normal home insurance rates in natural disaster prone areas may also be considerably higher than rates for areas that have no foreseeable natural disaster potential.
If you are renting a home, you should ask to know if your furniture is covered by the owner’s policy. Home insurance rates are based on replacement costs of your home and furniture and aplliance replacement. Many renters carry their own renter’s insurance policies along with their auto insurance policies. Some renters may want to cover their valuables if the owners insurance policy does not cover them.
Insurance costs vary from state to state, but you can budget at least 600 dollars a year for home insurance without any extra coverage. Actually, you would be saving yourself some money if you got your own insurance rather than getting the insurance as part of your mortgage.
