8 Property Insurance Questions to Ask Before You Buy a New Home

Buying
a new home is one of the scariest experiences in life, according to research. A
2018 study found that 40% of Americans believe purchasing a new home is the
most stressful event in modern life; 33% admitted that they broke down in tears
at some point during the home-buying process.

The
reactions are understandable. Home buying is a high-stakes, complicated, and
sometimes bewildering process. Luckily, there are skilled experts to guide you along
the way — such as your insurance agent.  

Too
often, insurance is an overlooked aspect of the home-buying process — just
another box that needs to be checked before closing. But it is important not to
overlook the fact that your property insurance policy is what will protect the
largest investment most Americans make in their lives against calamity.

When
you are shopping for property insurance for your new home, it is important to
ask the right questions so you can stay informed about exactly what you are
purchasing and what your policy is protecting. Here are a few key questions
that every homeowner should ask their agent before closing on a new home.

1.
What are the red flags in my inspection?

There
are many things that make homes attractive to potential buyers: curb appeal,
layout, the number of bedrooms, space for a growing family, interior design or
architecture, to name a few. Rarely, however, does a solid roof, up-to-date
plumbing, or electrical rewiring make the list. But these can have a
significant impact on how your home is insured.

A
good, trusted home inspection is the first step toward making sure you will be
able to purchase the right policy for your new home, says J.J. Wilson, a Texas
Farm Bureau Insurance agency manager in Canton.

2. Is the roof in
good condition?

“One
of the things that is so important to a homebuyer, whether new or seasoned, is
to get an accurate, detailed inspection on the roof,” Wilson says. “We often
look at a home, and the roof is not in the condition that is described or is
older than they thought it was. We want to get accurate information on the age
of the roof and its condition.”

3. How old is the
plumbing and wiring?

Wilson
says that homebuyers should also make sure they pay attention to the age of
their basic household systems, including the heating and air conditioning,
electrical, and plumbing.

“For
older homes, has the plumbing and electrical been updated or are you still
dealing with breakers from the 1950s or 1960s?” Wilson says. “Sometimes homes
have updated cosmetics, but other things not updated. It is important to look
deeper than what you see.”

4.
Will I be eligible for replacement cost value coverage?

One
of the reasons the age of the basic home functions matter is that they could
affect whether you can obtain replacement cost coverage or a policy that only
covers actual cash value. Wilson says this is a key policy difference that is
often confusing to home buyers.

“The
simple way of explaining it that I use is by explaining personal property
coverage,” Wilson says. “If you have a theft of a 10-year-old TV and you have
replacement cost coverage, we’re going to pay for what it costs to get a new
TV. If you have actual cash value, we are going to pay minus the depreciation
of the item.”

In
the case of a TV, that means an actual cash value policy won’t cover the full
cost of replacing the TV. With bigger-ticket items, like a damaged roof, an
actual cash value policy could leave you underinsured in the event of
catastrophic damage. Wilson says he always recommends homebuyers purchase a
replacement cash value policy, but on older homes with older roofs and other
systems, sometimes only actual cash value policies are available.

5.
What deductible should I choose?

Buying
a home is expensive, with lots of hidden costs that can sneak up on potential
homebuyers. It might be tempting, then, to try to save money by choosing an
insurance plan with a high deductible. But opting for a higher deductible can
be risky for homeowners, depending on their financial situation, and sometimes
it could mean that a loss is effectively not covered if its cost falls below
the deductible amount.

“I’m
cautious when people want to raise deductibles, but I just remind them that if you
start raising these deductibles, when you have a minor claim, you are not going
to have any coverage because the loss won’t exceed their deductible,” Wilson
says.

In
general, Wilson recommends homeowners purchase a policy with a deductible equal
to 1% of the value of the home.

6.
Am I in a floodplain?

If a home is in a federally designated flood plain, flood insurance will be necessary, and the price can vary greatly depending on the area’s designation. It’s important to look into this so it doesn’t become a surprise later in the process.

7.
What isn’t covered that I need to know about?

Not all insurance policies are made equal, and not all possible events are covered by a property insurance policy. It is important to ask your Texas Farm Bureau Insurance Agent before you purchase your policy what is covered.

“If
the cause of loss is not one of the named perils, it is not covered,” Wilson
says.

8. Do I need to add a
special rider policy?

Sometimes,
special rider policies are necessary to cover specific things outside your
property insurance; one common example is coverage for mold.

It
is a lot to navigate, particularly when there are so many other things to keep
track of during the homebuying process. But your Texas Farm Bureau Insurance Agent
has the knowledge and experience to make it all go as smoothly and as
stress-free as possible.

Read this first-timers guide to buying property insurance.

Coverage and discounts are subject to
qualifications and policy terms and may vary by situation. © 2020 Texas Farm
Bureau Insurance