Home Insurance Shopping 101 – The First Time Home Buyer’s Guide

A house is more than just a roof over your head; it’s an investment. For many people, it’s also one of the most expensive purchases they’ll make in their lifetime, which means this coincides with one of the biggest loans of their lifetime in the form of a giant mortgage. Right after that offer is approved on your new home, protecting it should be a number one priority. Home insurance quickly becomes one of the best ways to protect this investment. In fact, many insurance companies won’t even approve you for a mortgage to purchase your home without insurance.

When choosing your policy, you want to make sure you pick the one that’s right for you. Not all insurance is created equal and basic plans won’t meet your unique needs. Therefore, don’t procrastinate, do your research and prepare.

So, where do you start?

Figure out how much insurance you need at the very minimum.

It’s better to prepare for the worst to happen. Having deep coverage that can cover 100 percent of your home’s replacement cost is seen as a good place to start. Therefore, you help ensure that if something were to happen to your home, you wouldn’t lose out on the entire investment. Get an official assessment of the home and your belongings to value how much coverage you should purchase.

Know what’s covered and what’s not. The devil is in the details.

In most homeowners insurance policies you can expect damage to the interior or exterior of the house, damage to your personal belongings and liability protection to be included. However, you can also expect for flood, earthquake or poor home maintenance damage to not be covered. Homeowners policies may exclude certain circumstances, whether they’re not a named peril or they are explicitly excluded from a more encompassing plan. If this is the case, consider buying specific add-ons to tack on to your policy. If you’re in an area that is prone to earthquakes, getting separate earthquake coverage will help make sure there aren’t any surprises if you need to file a claim.

This is when riders and floaters come in. These provide additional coverage that basic home insurance policies do not. Floaters are good to purchase to insure your valuables as these assure that the full value of the item will be replaced if there is theft, loss or damage. A rider covers items that are either not cover or that have value that exceeds the per-item limit of your policy (i.e. jewelry, fine art, musical instruments). If your policy only covers 1,500 dollars in jewelry, but your wedding ring costs 10,000 dollars, taking out a rider to protect the value of that possession might be a good idea to consider. Make sure that there aren’t any fine print details in your policy that prohibit certain items from being covered or don’t cover the full value of the item.

The value of high deductibles.

A deductible is the amount of money you will pay out of the pocket in the chance you file a claim. For example, if you file a claim of 10,000 dollars and your deductible is for 500 dollars, your insurance company will pay 9,500 dollars, while you pay the 500. The higher your deductible, the lower your premium. By assuming more of your own risk, you are taking some of the burden off of insurance companies. Therefore, your deductible should be as high as you can reasonably afford in the event of a claim. By raising your deductible, you can cut the cost of your premiums up to 20 percent.

If raising your deductible even $1000 saves you $200/year on your annual premium, you only need to go 5 years to start ‘making money’ on your investment choice, if you will.  Couple this with the fact that the average homeowner makes a claim every 9 years and it becomes a wise decision for the long game of home insurance.  Dash suggests putting this deductible savings into a sort of “home maintenance slush fund” in case a small incident does happen so that you still have the money on hand.  Worst-case, that home maintenance fund becomes a vacation fund if you go multiple years without tapping into it!

Pick your battles.

The moment you file a claim, your rates are almost guaranteed to go up. In the eyes of many insurers, you become uninsurable after you file as few as two claims in three years. To insurance companies this looks like you have become a bigger risk of filing future claims, and to compensate for this risk, they will most likely raise your rates.

In Minnesota, the average premium increase after one claim is one of the highest in the nation. After filing just one claim, your annual premium cost increases at an average of 21.2 percent, far surpassing the 9 percent national average. On top of that, as a Minnesota resident, you’re already paying higher premiums to begin with due to the often times extreme winters, spring hail, tornado seasons and subsequent risk of damage to your home. In 2010, the average annual cost of homeowners insurance in Minnesota was 981 dollars, whereas the national average was 909 dollars.

Therefore, as Minnesotans we have to pick our battles wisely, understanding the implications of the small claims, or the $0-pay.

Let’s say there is a hailstorm one evening. You check the next day to assess the damage and realize that some shingles are missing or loose, costing about 700 dollars in damage. Now, let’s say your deductible is 700. If you file a claim, you’ll become a victim of the $0-pay. Minnesota law actually prohibits insurers from raising your premium based on an “act of God” type claim like wind or hail. However, this $0-pay still counts as a claim against you and can therefore make you ineligible to switch carriers because of the “two claims in three years” standard, meaning you’re essentially stuck with the insurer whether you like them or not for a certain period of time because you can’t go elsewhere.

If you raise your deductible, you can help avoid these small claims and save money every year through lower premiums.


One of the best things you can do to secure your investment is get the right type of homeowners insurance and be prepared. Take an inventory of what you own and continually update it. Other things to consider that might affect your insurance policy coverage are the breed of dog you have, if you have a wood furnace or stove, or if you have a swimming pool or trampoline. These can increase your liability, resulting in higher monthly premiums.

Additionally, look for discounts. Many newer homes qualify for discounts because the new materials can be more durable. If you have a smoke detector, alarm system, fire-sprinkler system, deadbolt locks or window security devices, this can help provide more security to your plan and lower your monthly premiums. If you bundle your homeowners insurance with your auto insurance, you can also save some money.

Don’t assume that the insurance you buy when your first purchase your home will be the same coverage you’ll need in a few years. As your possessions and value of your home change, your coverage should adapt along with them. Remember that you get what you pay for and if you choose a basic/low cost policy, your coverage will follow suit, and your investment will be less secure.

The Five Steps to Take After an Accident

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Step 1:  Take stock of your condition and the condition of your passengers.  If it’s an emergency, step one is obviously “Call 911”. 

Step 2:  If possible, move your vehicle to the shoulder or place of relative safety.  This is especially important in the winter months, where many accidents occur due to icy conditions.  If your car slipped and lost control, it stands to reason that you’re in a lot of danger from other cars suffering a similar fate if you don’t get out of the way.

Step 3:  If there is another driver involved, try to collect as much information from him/her as possible.  A full name, phone number, insurance company and policy number is ideal, but even getting the name of the other driver and his/her insurance carrier can be the difference between getting your claim taken care of and suffering what basically amounts to a hit and run if you can’t find the other driver in the future.  It can also be important in this step to not admit any fault, regardless of how the accident came about.

Step 4:  If you’re not at fault, it’s especially crucial that you wait for the police and file a report.  When drivers are shaken up they might be gracious enough to admit to you on the spot that it was “totally their fault!” but recollections after the fact can be extremely defensive and unhelpful.  If you were indeed not at fault like you claim, a police report is an official record of events that tells your insurance company how to file it.  The industry these days is getting much better about not charging insureds for “no fault” accidents.

Step 5:  Call your agent!  It is your agent’s job to be the middle man between you and your giant, bureaucratic insurance company.  Call your agent and fill him/her in on what happened, even if both drivers walked away deciding that there wasn’t any need to get the companies involved.  The more information we have, the more we can represent you if the other driver’s company comes calling.  This also allows the agent to talk you through whether or not it’s worth filing a claim or not.  If you have a $1000 deductible and it’s going to cost $950 to fix your fender, you shouldn’t be filing a claim.  You’d be surprised how many of these come in!