Congratulations! You’ve chosen a new home, and you’re ready to seal the deal. You’re going to be a homeowner, and all that’s left to do is sign some paperwork. But before you do, read this! We’re about to give you a few useful tips that you can use when shopping for insurance for your new home. 

1. Bundle Payments with Mortgage Payments

A great way to save on upfront costs and to keep your lender happy in the knowledge that your shared investment is secure, is to bundle your mortgage and your insurance payments together. That way, everything will be worked out from the start, and you only need to remember to make one payment. 

2. Get at Least Three Quotes

Home insurance requirements can vary based on the location of your home, the type of construction, whether you are buying new construction or not, and several other factors. Your lender will usually have a list of criteria that they consider minimum coverage for the new home you are buying, which will include the level of coverage, and any additional policies that you need to cover for specific issues. Request a copy of this list from them, to make sure you are comparing apples to apples. 

Once you have all of the minimum requirements listed, your next task is to approach at least three insurance companies, to request a quotation based on this list. You will need to ensure that they all include everything on the list, and if you prefer to ask for more quotes, that’s also fine. 

3. Choose the Right Level of Coverage

Just as being under insured is a big problem, being over insured can be a problem too. Make sure that you are getting the right level of insurance, and that you’re not paying for coverage you don’t need. The general levels of coverage include:

• HO8 is for older homes, where only the cash value of the home is covered
• HO7 is a mobile home policy, with specific exclusions if applicable
• HO6 is for condominiums or co-ops
• HO5 is a premium policy for new homes, which covers everything, unless it’s a specific exclusion
• HO3 is a broad policy that includes specific exclusions
• HO2 is a broad policy, which covers a specific list of 16 risks

Your mortgage lender will be able to tell you which policy you need, but usually, if you are buying new construction, you will need either an HO5, HO3 or HO2 policy. 

4. Know Your Jargon

Insurance policies can be a bit of a mystery to anyone who is not familiar with them. There are specific terms that are used in most policies, and here are a few of them, with brief definitions:

• Actual cash value is the current cash value less depreciation of a home or home contents
• Replacement cost is the cost to replace a home or goods
• Deductible, as per auto insurance, is the amount you will pay yourself before your insurance pays for your home or belongings
• Riders are additions to your core policy to cover specific items
• Premiums are the annual or monthly costs for your policy

If you aren’t sure about insurance terminology, there are some great websites that offer detailed definitions and advice. Do your research before you choose a policy, and don’t be afraid to ask questions.