New York Real Estate Lawyer Blog
Let’s face it– the purchase of a home is a life altering, stressful and often expensive proposition with hidden fees, costs, and expenses. Many times, a Mortgage Commitment comes from the bank with the requirement that the new homeowner purchase home owner insurance. My clients often call the agent who issued their automobile policy and ask for insurance, but they don’t ask the right questions, or make assumptions that hamper them later– particularly when they need that policy to respond to some sort of loss. I took up this issue with my friend and compatriate in the real estate world– William C. Allen, William C. Allen Insurance Agency, 372 Willis Avenue Mineola, NY 11501. Here are some helpful insurance tips.
Although it is an intangible product, insurance is the safety net that fills the gap when things go terribly wrong so adequately protecting a home, usually one’s largest asset, is essential. Considering the high costs associated with buying a home, many new homeowners make the mistake of trying to save money by purchasing the most inexpensive insurance they can find. This does not mean they should overpay, but inexpensive policies often omit or limit coverage and may contain exclusions (things that aren’t covered) that could end up costing the homeowner more in the long run if a loss occurs.
First time home buyers should ask trusted friends, family members or their attorney for a referral to an experienced insurance agent who can explain the various nuances associated with homeowners insurance. Because an agent’s job is to manage risk, a good one will include in the discussion what the coverages are, what different insurance companies have to offer and, lastly, ways to limit the cost of the insurance.
Dwelling or building coverage is the amount it would cost to rebuild a home in the event of a total loss. Many companies will offer guaranteed replacement or an additional percentage above what the dwelling coverage is in order to cover cost overruns during the rebuilding process. Some companies will limit the amount they will pay to replace a roof based on how old the roof is while others may limit the replacement of the home to “similar” construction rather than “same” construction. There is a difference, that’s why it is important to speak with someone familiar with the policy language of the various insurance companies in order to help make the right choice. [I always recommend asking the questions– what is replacement cost coverage, what is ordiance and law coverage, how much demolition is covered].
Besides having the proper amount of coverage to rebuild the home in case of a loss, homebuyers should also consider adequate coverage to replace personal property such as clothes, furniture, electronics, etc. Some policies provide an automatic percentage of the dwelling amount as the amount for personal property but an insurance agent can help determine how much property coverage there should be based on the size of the home. That amount may vary but most people have more than they think so considering what it would cost to replace everything is important. Also, opt for a coverage called replacement cost on contents which will pay to replace items lost at today’s prices rather than paying a depreciated amount.
It is also important to take inventory of those possessions. One of the easiest ways of doing this is with a video camera, narrating while walking through the home describing items and what they cost. Burn the video to a DVD and remember to keep a copy at a location other than in the home. In the event of a loss, it is incumbent upon the homeowner to list all items lost or stolen so performing this task ahead of time will speed up any claims process.
Homebuyers should also consider if there are any outstanding liability issues with the home. If there are cracks in the sidewalk or if gutters are hanging loosely from the roof or if all the stairs are sagging and feel unsturdy, an insurance company may opt not to insure that home. Insurance companies will cancel a policy if they determine there are areas of the home both inside and out that are dangerous and could cause an injury. New homebuyers should hire an experienced independent inspector who will point out not only any liability issues but any other problems the house might have.
The Bottom Line– Ask a qualified insurance broker to quote you the best policy you can afford, being sure to consider the options, including the bells and whistles. I thank
Bill Allen for contributing to this Blog. He is an independent insurance professional and owner of the William C Allen Insurance Agency offering most forms of insurance including homeowners insurance throughout New York and the Tri-State area.