Homeowners insurance is an often overlooked expense when purchasing a New York City condo, co-op or townhouse. Below are explanations on what to understand, as well as tips to lower your homeowner’s insurance premium. We delve deeper into this arcane topic as well as homeowner’s insurance vs. home warranty.
Guide to Homeowners Insurance
Table of Contents
Why do I need homeowners insurance?
You will likely be required by your lender to have homeowners insurance if you have a mortgage. Such insurance protects the mortgage 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 — 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 does homeowners insurance cover?
A standard insurance policy covers the home along with possessions inside. They are protecting 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 usually 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 earthquakes are not a concern for apartment dwellers in New York City. Problems caused by a lack of maintenance, such as leaky pipes, will be your responsibility to fix.
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How much home 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 it has depreciated. You will have to prove you repaired the issue, 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. Making it easier to determine how much coverage you need as well as expediting a claim should you have to create 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 kept 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.
What are the insurance premiums?
Several factors will affect your homeowner’s insurance premium. Such insurance 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 a modern 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?
How to find the right Homeowners Insurance?
When the free market, is flooded, with homeowners insurance companies vying for your business, how do you choose? Overall, seek out providers that offer both integrity and affordability.
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What should you look for in Homeowners Insurance?
New Yorkers face the problem of annual homeowners insurance premiums that are over $100 the national average of $1,034, which means that New Yorkers have to pay more than the rest of the nation’s homeowners for the same amount of coverage. Thankfully, by exploring your options and taking all the necessary precautions, you can still have excellent protection for your home without sacrificing too much of your hard-earned money.
Choose an Insurance Company That’s Upfront with Costs and Coverage
Insurance providers vary in their levels of price and coverage transparency. As a homeowner, you need to find a company that’s 100 percent open about what you’ll pay and very specific about what you’re getting for your money. Be sure to explore the fine print. If you see too many odd “exceptions” to your coverage, ask questions, but it’s probably smart to keep on shopping.
Find One That Recommends Only, What You Need
An insurer that pushes you to pay for add-ons like earthquake coverage, when the risks for tremors in NYC are relatively low, probably isn’t the right choice. Instead, you want a provider to offer useful additions like flood insurance. Since rising waters do pose problems for homes on Long Island, investing in this kind of add-on to your plan could keep you out of some future trouble.
Look for an Insurance Company That Offers Discounts
If you have multiple insurance needs, you should explore the option of covering everything with one provider. Insurance companies that offer life, auto, boat, and home insurance into bundle discount packages can take some of the stings of your finances. Plus, lower prices mean you can get good coverage for lower rates.
You will also want to find a provider who offers better premiums when you lower the risk factors in your home. A good insurance company will also give discounts to new homes, new customers, and retirees. When a company offers the right incentives, you know they value your patronage.
A Good Provider Will Charge You Based on Your Home’s True Value
You don’t want to pay for coverage for a million-dollar home when your dwelling is worth $700,000. Since your home’s cost of replacement plays a significant role in the size of your premium, getting an accurate appraisal is vital.
Don’t let an insurance provider’s assessment be the final say. Instead, get a home builder or appraiser to offer a second opinion. With third-party help, you can often get more accurate assessments that grant you a more reasonable premium. If your company won’t be open to evaluations from other professionals, it’s time to keep on shopping.
You don’t have to skimp on coverage to afford homeownership in New York. Instead, take your time when looking for homeowners insurance and do business with an honest and fair provider.
Homeowners Insurance vs. Home Warranty?
We have previously discussed the importance of home insurance. Lenders require it, although we recommend having insurance even if you do not have a mortgage.
However, this is different than a home warranty. While you can consider both a type of insurance, each covers different circumstances.
Home insurance
A home insurance policy covers expenses for your repairs when there is an event, such as a natural disaster, fire, and theft. When you are shopping for an insurance policy, you need to understand what Homeowners and the deductible. You can choose a higher deductible to lower your premium, but this provides less protection since you have to pay more out of your pocket in the event you need the insurance.
For a condo, you own the unit, so you need to ensure it and all of your contents. In a co-op, you are a shareholder, holding a percentage of the entire building. In this case, you should have insurance for your personal property, and the co-op board will purchase a policy that covers the building. Your monthly maintenance fee contributes to funding the plan.
Home warranty
You are not required to have a home warranty. Unlike a home insurance policy, which would cover the items when there is a specific event, a home warranty covers the Homeowner’s for normal wear and tear. Home warranties cover specific appliances when they break down, either paying for the repair or give you money towards a replacement, depending on the policy’s details.
Typically, the items include the furnace, air conditioning, washers/dryer, and dishwasher. Again, it behooves you to examine the specific policy to see your coverage and deductibles. It is not unusual for the plan to have a modest deductible. The basic warranty may not cover the most expensive items, although you can purchase additional coverage to include topics not covered in your policy if you wish.
A negotiable item
When purchasing a home, you can ask the seller to pay for a home warranty for a period, typically a year. If the appliances are older this helps. Sellers might go along to alleviate the buyer’s anxiety and help close the deal. A survey taken several years ago showed homes with a home warranty sold faster and for more money, although this, was conducted by American Shield, a large provider of home warranties.
Cost-benefit analysis
If you are getting a home warranty on your own, weigh the premium cost against the potential repair expense. You might find it more economical to place the money in a fund that you can use for repairs or replacement. Takes discipline to create an individual savings account and regularly contribute money, however. Of course, if you are handy, you might not need a home warranty policy at all.
You do not get to choose your person to conduct the repair. When something breaks down, you call the warranty company, which sends someone from one of its contracted repair companies. You should keep this in mind if you already have someone in mind that you like very much.
Final thoughts
Homeowners 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. Getting the right amount of insurance can save you headaches later one.
