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Homeowners insurance is an often overlooked expense when purchasing a New York City apartment. In our Homebuyers Handbook, we provide an overview of warranties and insurance considerations, which is an excellent place to start. There are explanations on what to look at for and understand, as well as tips to lower your homeowner’s insurance premium. We will review this material and delve deeper into this arcane topic.

Do I need Homeowners insurance in NYC?

You will likely be required by your lender to have homeowners insurance if you have a mortgage. This protects the lender, which has a lien on your property, in the event your home is damaged.

For those that do not have a mortgage, it is strongly advised you take out a policy. This is a significant asset, perhaps your biggest one, particularly given real estate values in New York City. You will likely want to protect your interest from an unfortunate event. It also protects you should someone get injured and decide to sue you. If you have purchased a condo or co-op, the board may also require you to buy insurance.

Keep in mind; a homeowners insurance policy is different than a home warranty. The latter covers specific items in the home. For example, it could include the dishwasher, air conditioner, refrigerator, and washer/dryer, in the event one of these breaks down. It does not cover a loss from a natural disaster or theft, as a homeowners policy does.

What it covers

A standard insurance policy covers the home along with possessions inside. This protects against damage to your property and any liability that may arise from injuries or property damage caused by you or your family members. Events such as fire, theft, and specific natural disasters are typically covered. Policies in this part of the country typically include wind damage (this may not be the case in other states, such as Florida). Most policies specifically exclude damage from floods and earthquakes, although these probably are not a concern for apartment dwellers in Manhattan. Problems caused by a lack of maintenance, such as leaky pipes, will be your responsibility to fix.

How much insurance?

How much insurance coverage to purchase is dependent on the value of your home and possessions. You should seek the replacement cost. Therefore, it is incumbent upon you to calculate how much you need to protect. First, look at the value of your home. Your insurance agent can help you with this by going through the various features, such as square footage, the number of bedrooms, and other items that would affect the value. Replacement cost will pay out the amount to replace the item, even if has depreciated. You will have to prove you replaced the item. This is opposed to actual cash value, which pays the original cost less any depreciation.

It is recommended you make an inventory list of the items in your home. This will make it easier to determine how much coverage you need as well as expediting a claim should you have to make one. You should list your possessions, particularly significant ticket items, and include the make and model, along with receipts and appraisals. It is also a good idea to take pictures and videotape a walk-through, which should be stored in a secure place such as a safe-deposit box.

As for liability coverage, the Insurance Information Institute states that increasingly $300,000 to $1,000,000 is recommended. However, if you have a high net worth, consider adding on to this amount.

Premiums

There are several factors that will affect your homeowner’s insurance premium. This includes the home’s features, location, and any protective devices such as an alarm system and smoke detectors. If your building has a doorman or security guard, or an up-to-date fire alarm system, your premiums will also be lower.

There are several tips to try to save money on the premium. First, shop around. With the Internet, this is easier than ever. Beyond that, purchasing homeowners and car insurance through the same company will likely get you a discount. There may be other discounts you are eligible for, such as professional affiliations. Depending on your risk tolerance and the amount you can afford to spend should something happen, your premium will be lower if you are willing to have a higher deductible?

Final thoughts

Insurance is a topic akin to going to the dentist. It may be necessary, but many do not find the experience pleasant. However, it is an essential step if you are going to be a homeowner, and getting the right amount of insurance can save you headaches later one.

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