Homeowner's insurance protects your financial investment in your home in the case of damage or theft. When unexpected disaster strikes, your insurance policy may cover all or a portion of the expenses required to return your home to its original state. Unfortunately, many homeowners purchase insurance quickly at the time they apply for a mortgage and may not be getting the best deal.
Premiums
Your homeowner's insurance policy premium depends upon the age of your home, its market value and the cost to replace or repair the home. In addition, the condition of your home and the materials used in construction may affect your premiums. The insurance company may view a home with old wiring, an old roof and a wood burning stove as an accident waiting to happen and they may charge a higher premium.
Requirements
Your bank may require proof of insurance before approving your mortgage loan. The lender may even recommend an insurance agency. Check with that agent, but call other agencies as well. Different insurers rate risk differently and you may save money by shopping around.
Options
In addition to the minimum amount of insurance the bank requires you to carry on a mortgaged home, you may purchase additional insurance that will further protect your investment. Ask for comprehensive insurance that covers most types of natural disasters as well as vandalism and theft. Most homeowner's policies offer an option for increasing the coverage of personal property for a higher annual premium.
Geography
Flood insurance will cost more in a coastal region than it will in a mountainous region. Likewise, insuring loss to a home from an earthquake will raise a homeowner's premiums if he lives in an area that experiences frequent quakes. Before home shopping, find out what type of home is cheaper to insure in your community. You can lower your rates and your risk by buying a home that is less likely to suffer from known local hazards.
Considerations
Accepting a higher deductible will lower your premium but it may also put you in a financial crunch if your home suffers from damage or theft. Some agencies will only insure a home for its replacement cost but if you own a home that is older, you might save money by contacting other agencies to find one that covers repairs based upon the home's market value.
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