An average person spends 40-50% of their monthly income on housing and its utilities. For most people, a home is the largest investment they'll hold and own.
A home is thought of as a place to raise a family more than an investment opportunity. However, a house is both.
Unlike a stock or a bond, a house is a physical asset. So, it's exposed to more than just economic fluctuation. The risk is the world around it.
Here's how to buy home insurance to cover your assets.
Make a Shopping List
There's an entire market of insurers that can offer an array of coverage. You should consider each major insurer and get a quote.
Compare their payout limits and find a suitable deductible. The higher the deductible, the lower the monthly cost.
Be wary of high deductibles; their monthly cost may entice you. If you're accident-prone or high-risk, you'll file more claims. And each claim you'll incur a deductible.
This is your home, after all. It might be instinctual to spend as little as possible, but that can affect you when disaster strikes.
Compare ratings of companies. Don't go by user reviews, but an industry rating. If you're in Georgia, try this resource for homeowner.
Moody's and A.M. Best are two sources of insurer raters. They do a much better job than the average consumer. Their analysts compare businesses and evaluate their service on payout likelihood.
Location, Location, Location
It's a timeless real estate adage. It's timeless because of how much truth is imbued into it.
Location is a huge factor in every aspect of property ownership. Whether you're buying, selling, or insuring your home, location plays its part in price. A home in a less desirable place will cost less to buy, but cost more to insure.
Consider what an insurance company is and what it does. It's an agency that edges risk to make a return on investment. They're paid a monthly subscription based on how likely it is your asset is negatively affected.
That means, if you've bought a house in a risky area, you'll bear the cost of its riskiness in your premiums.
A house that's located further and further from a fire station has a risk of burning down. Insurers also evaluate crime rates to determine how likely your house is exposed to malicious intent.
How to Buy Home Insurance
With insurance, you have to know what your coverage will pay for.
When Hurricane Katrina swept away Louisiana, many people with hurricane insurance weren't given claim payouts. Their coverage extended to destructive high winds, but not rising waters. Because they overlooked their coverage, their insurers were less than helpful.
Purchasing the right deductible depends on your risk adversity. If you think you won't use the insurance, a high deductible would be best. If you're at risk, a lower deductible is better.
Insurance is a necessity when you own a large investment. And, unlike many investments, real estate has environmental risks. It's crucial to know how to buy home insurance.
You should find insurance based on your location and how risk-averse you are. Be sure to shop around, too, as there are a lot of insurers.
Interested in more than just real estate? Check out the other posts for your financial needs.