What is home owners insurance?
Home owners insurance is a sort of coverage for private homes and their annexes. Its main purpose is to cover the premises, their contents and the civil liability of their occupants. That is, the policy protects your home and property against many disasters that may occur. Be careful though, the contract never covers all of your possessions.
Guaranteeing the protection of your home, the homeowners insurance certifies you a partial or total reimbursement in case of damage. It also covers you, as well as members of your family (and by extension your pets), in incidents involving a third party.
Home owners insurance definition of coverage
Although there are many items that must be paid for as part of the closing of a loan, many people are surprised that one of the closing costs often tacked onto a home mortgage is mortgage insurance, also called hazard insurance, home owners insurance or just HOI.
First of all, mortgage insurances do not protect you, but instead are insurance policies that protect the lender in case you default on the loan. This is usually paid to a private insurance company. Because a mortgage is often in the vicinity of hundreds of thousands of dollars, if there were no insurance to back it up the lender would lose a tremendous amount of money when a borrower stops paying on the loan. The lender charges the borrower the cost of this insurance so that lending the money is not as risky. This insurance allows the lender to offer low rates to the borrower who needs the home loan.
While you may often see an amount for mortgage insurance as part of the closing costs, you will be even more likely to see it on the Good Faith Estimate or Truth-in-Lending documents. The reason for this is that you will be making a monthly payment toward this insurance policy each month when you make your mortgage payment. In other words, it will be added to your loan on a monthly basis. It is good to know that this does not go on forever. Once the amount of your loan is less than 80% of the value of your home, you can usually drop the mortgage insurance. Often, when you do mortgage refinancing on your home you will have to continue paying this insurance unless your home’s value has increased enough to make your total mortgage refinance less than 80% of the value of the home.
For people who are looking at bad credit mortgage loans, home owners insurance will be needed unless they make a 20% down payment on the initial loan. As you can see, it doesn’t matter what kind of loan product you get, you may be required to pay for the additional mortgage insurance in order to get the loan. The rates for mortgage insurance premiums tend to vary from one lender to the next, so it is a good idea to shop around for the lowest rate if you think you will end up paying mortgage insurance. If you can make a large enough down payment, you won’t have to deal with mortgage insurance at all.
7 tips to pay cheaper for your home owners insurance
It is possible to save on your home insurance without the help of an expert. Here are some tips that will help you lower your insurance premium.
- Installation of safety devices
Doing this only can save you up to 10%. The installation of a smoke detector or alarm is a significant investment. But this equipment generally reduces the price of insurance. They do indeed limit the risk of theft or fire. Adding in your home safety features can not only ensure you a better degree of protection but also impact your home owners insurance premium. Remember that burglar alarms, smoke alarms or the security of your doors can save you money on your policy regardless of the insurer you have. Whether you own or rent, your insurance will be immediately cheaper.
- Choose a high deductible
The deductible is the amount that remains at your expense after a loss. If you have little savings, take a high deductible. Increasing your deductibles to reduce your homeowners insurance premium can be an interesting solution. Know that the lower your deductible, the higher the price of your coverage. As a tenant, you will therefore pay less for your home insurance if you agree to participate more in the costs in case of disaster. This technique can save you about 20%.
- Choose safe location of residence
The city life is not advantageous for many reasons, including financially. Living away from big cities can reduce your premium. Indeed, the risk rate is not the same as in urban areas and your home insurance would immediately be impacted. If you enjoy the city life, you can always save money by choosing to live near a fire hydrant or a fire station. These locations reduce the risk of a major fire and, as a result, reduce your home owners insurance premium.
- Evaluate your assets regularly
The nature and values of your assets decrease over time. It is therefore important to make a regular inventory of what you own and update your coverage accordingly. This will not only allow you to better adjust your home owners insurance coverage, but also facilitate claims in the event of a claim.
5 – Choose low compensation ceilings
The ceilings determine the maximum reimbursements you receive in the event of a loss on movable property. They vary according to the insurance and guarantees chosen. If you have few valuable assets, choose insurance that offers low capital. This is important as the insurer generally compensates the use value of the equipment, taking into account their depreciation, wear and tear.
6 – Consider paying annually
The year-round payment of the insurance premium is always cheaper than the installments. It can save you up to 15%. Frequent payments result in additional costs related to management fees. Also consider paying by credit card or direct debit. Checks may incur additional charges.
7 – Compare home insurance quotes on the Internet
Do you know you can save up to 30% by comparing home insurance quotes from different companies? On-line comparisons make it possible to find generally cheaper offers. They help you find the insurers that offer the cheapest rates according to your profile. The contracts offered are generally modular and adaptable to your needs. Many websites allow you to compare homeowners insurance companies for free.
Insurers regularly organize promotional campaigns or offer limited time savings. Why not take advantage of these promotions to get cheaper home owners insurance? The best is undoubtedly to use home insurance comparators in order to benefit from the offer in the market best suited to your needs and your wallet.