Insurance and Finance

First Time Buying Property Insurance? Here’s What You Need to Know

By Peter Simek 3.25.19

Buying property insurance for the first time can be overwhelming. So many products, so much to consider, and a whole legal framework that dictates what coverages you need. Then there is the simple language barrier. What’s a loss? What is actual cash value? Cash equivalent? Catastrophe loss? Encumberance? Proximate cause? Phew.

Before you get overwhelmed, take stock of these first steps you’ll take to help you through the process.

Determine What Kind of Coverage You Need

Technically speaking, your first insurance policy was probably when your parents added you to their auto insurance plan when you were 16.

You may have dealt with health insurance and renters insurance, too. But your first big decision usually comes when you purchase a home.

Your property insurance policy is an important step both for covering your assets and for negotiating the terms of your loan; your lending bank will require adequate coverage.

Depending on where you live, the bank or the government may have additional requirements for flood, windstorm, or other policies.

Take some time to sit down with your Texas Farm Bureau Insurance Agent and go over what coverages are required, what are recommended, and what your personal needs are.

Determine How Much Coverage You Need

Now you need to navigate establishing the value of your property.

Kris Handlon, a Texas Farm Bureau Insurance Agent in Decatur, says there is often tension between what a mortgage company wants and what makes sense for you and your family.

One piece of advice he makes sure to give homebuyers: They should only buy enough coverage to replace the home itself and not the total price of the property.

“You’ve got land value in there that you can take out of that equation,” he says. “That land may be worth more than what we can insure it for. We can go 20 percent above the replacement value of the house, not insuring the dirt it’s built on.”

Understand Your Quote

Walk through the quote you receive from your Agent to make sure you understand everything that’s covered and feel comfortable with what you’ve budgeted.

What’s your deductible? What’s the estimated replacement cost for the house? How will the initial escrow payment be handled at closing?

Understand the Claims Process

Many Texas Farm Bureau Insurance policyholders often strike up a relationship with their Agents, who advise them to check in once a year for a free 360 Review of their policies and coverages.

This makes it easy to file claims, if that day comes, with no surprises, since you’ll be aware of your coverages and have a trusted source to rely on. Texas Farm Bureau Insurance adjusters will be on hand to perform an inspection and your Agent will take care of the rest.

Tip: Don’t Skimp on Premiums

Handlon discourages new buyers from falling into another common mistake: trying to save a few dollars each month on the premium cost in exchange for insufficient coverage or a massive deductible. In the long run, he says, it’s never worth it.

Start Building Your Insurance Portfolio

The homebuying process is a great time for young clients to begin thinking about their insurance products as a portfolio.

Bundling auto insurance with property insurance almost always leads to cost savings. And after homebuyers close on a house, they will likely begin receiving letters from their mortgage company advertising “mortgage protection.” Handlon explains that this is essentially a form of life insurance, and he tries to schedule a follow-up meeting with new clients to talk through their life insurance options.

But not until after closing, he says.

“When you’re young, it is kind of overwhelming with all the things getting thrown at you,” Handlon says. “I try to be respectful of that. I try to always write their policy like I would write my own.”

Although buying insurance for the first time can seem daunting, all it takes is an Agent you know and trust to walk you through your options.

Still have questions? Call your local Texas Farm Bureau Insurance Agent to talk through your options, or simply get a quote here.

Coverage and discounts are subject to qualifications and policy terms and may vary by situation. Life insurance products are offered through Southern Farm Bureau Insurance Company.

© 2019 Texas Farm Bureau Insurance