For policyholders, an unexpected premium or rate increase on your policy can be quite detrimental as it pertains to your monthly payment. Learn how you can avoid these premium hikes, and keep your rates as low as possible as a buyer. There are five unexpected costs a buyer should be aware of, as detailed below.
1. Fun Accessories
You know those “fun” things in your home, they are also the nuisances an insurance company considers extremely risky, equating to a costly risk. A dog, believe it or not, is one of the costliest nuisances. A swimming pool is another well known reason your rates jump on a policy premium. Not only are they dangerous for the kids, but also visitors who use your pool (with or without permission).
With these risks, you can see why rates spike up so high; in addition to these two listed above, other common nuisances include:
Tree houses, zip lines, trampolines, diving boards or slides. They are dangerous, risky, and if they are on your property, can result in a major price increase in your premium rates.
2. Structural/design elements which are risky
Of course not all perils which hike up those rates are under your control; this is one category you must consider as a buyer if you are shopping for a new home, and want to keep rates down. Some of these items might already be in the home when you move in.A stove or wood burning fireplace account for up to 36% of rural residential household fires annually. This is one of those risks insurance companies look at.
A widening staircase or balcony are also risky in terms of policy premium hikes. They are accountable for 20 to 30% of falls in homes annually, which can lead to major injuries. This is noted by the Center for Disease Control and Prevention. Your appliances, shoddy plumbing work, wiring and other structural issues, are also dangerous which can lead to higher premium rates for owners. If your appliances are 25 years or older, it might be time to consider an upgrade.
3. A business run out of your home
Scanners, printers, computers, electronics, desks and chairs, phones; these are only a few of the items you are going to need if you run a business out of your home. If a burglary or a fire were to occur, these are additional items which require protection; and, they aren’t cheap to cover. Additionally, if clients visit the home, personal liability policies should be in place to avoid lawsuits or liability in the event of injuries.
For the best coverage, many home businesses should have an additional policy or endorsement; a designated business policy might be the better route to go as opposed to homeowner coverage, if your business posses many risks.
4. Those luxury items
Sure, the watches, clothing, and cheaper items you own are covered by a basic homeowner insurance policy and will be reimbursed for in the event of loss. But how about that Picasso painting, that pricey engagement ring, or your collection of Gucci leather jackets? These and other luxury items are extremely costly, meaning an insurance company is going to hike up your premium if you would like to have the added protection of insuring these items in your home.
Your home could be a serious target for theft or burglaries, simply having these items in it; so of course your rates are going to go up because of that. In some instance, separate insurance riders are required for items of a certain value. Big ticket items will benefit from a rider policy coverage, as the full value of these items is accounted for and protected with your homeowners insurance rates.
5. Where you live (the neighborhood)
Location, location, location. Yes we want the best when it comes to buying a home. But, just as compelling as it is as times, where we live can also mean a peril in terms of the rates you are going to pay when it comes to your insurance premiums as a homeowner. If burglary claims have risen where you live in recent years, a rate increase might follow. This also goes for claims of fire, or other policy coverage protection. As an owner, simply because you live in those areas, you are going to pay the price for it, even if you never have to use your policy. This means even if you’ve never had an incident or filed a claim, the price of your premium can jump a great deal, just because of the area you live in.
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Those mishaps in the area, might pose a greater risk for you as an owner in that area. So this is one of the reasons which insurance companies give if you live in an area which is risky or has seen many claims in recent months and years. As an owner, you and your belongings are potentially at risk meaning you are going to pay a higher price to protect these items and your home.
This basically means if the number of house fires goes up where you live or on your block, or if several burglaries start popping up in the area you live in, your home is considered to be in a “risk area.” This means you are living in an area which is prone to threats, meaning you are living in an area which is not considered to be safe by the insurance provider you have your premium coverage with.
It is important to know what you are paying for, and what might cause those rates to increase as it pertains to your premiums on a homeowners policy. With Coastal Insurance, not only can you rely on the top agents to help you find the right level of coverage, but also to fully understand what is protected under your policy. Further, the agents you speak to are going to address your issues, concerns, and are always available to answer any questions you have, as they pertain to your policy, the rates, or additional coverage that you want to add to the existing policy that you already have in place with the insurer.
So you’ve decided to buy a new home. However, unlocking the door to your first home isn’t as simple as finding the right location. Once you’ve found that location, you need to compare prices, financing options and get through those challenges beyond simply finding the home with the finest curb appeal. When buying a home, some steps you’ll go through are:
Getting a mortgage approval
Finding the right agent to work with
Finding a home which fits your budget
Most buyers think if they can afford the mortgage they are ready to buy, but this isn’t the case. New York Insurance Agent David W. Clausen, president of Coastal Insurance states: “Many purchasers know where their mortgage payment will fall but forget to take into account closing costs, title insurance, increase in property taxes and a host of other incidentals.”
Search for rates and find out whether or not you can truly afford that home. Go to bankrate.com to get started.
These are five areas buyers don’t account for, which can cost more than they bargained for.
Homeowner’s insurance, taxes, HOA fees, electric and water bills, and even maintenance dues. Most first time buyers overlook these costs when shopping. Clausen adds, “It is also important to know property taxes and insurance costs typically trend up on a yearly basis.”He further goes on to state if you are possibly going to switch jobs in a couple of years, it might not be the best time to buy. It is best to pick a home only if you can ideally plan on living there at least 5 to 7 years.
Buying doesn’t start when you are looking for a home. It starts with mortgage applications, unless you are one of the lucky few who can afford a cash purchase. Clausen notes how some buyers are afraid of preapproval. As a broker/owner at Coastal Insurance on Long Island, NY he discusses how buyers are afraid of not being approved; so they simply pick a figure out of the sky in hopes of finding a home within that range.
First things first
Clausen says this isn’t how the process should go. Although it is fun to first look at homes, this is the backwards way of doing things. You should first get preapproved then shop; not only does this show you how much you can afford, but also prevents being dejected if you fall in love with a home you can’t afford.
As a new buyer, you need a reputable agent, legal team, loan officer, and broker. Anderson states if you are going in as a first time buyer, it isn’t wise to do it on your own. He further states how first time buyers shouldn’t deal with the listing agent directly, but also notes that every situation has its exception.
He compares this scenario to a divorce. If you are going through a divorce, you wouldn’t go to your ex-spouses attorney, would you? You need a buyer’s agent when buying a home. A listing agent is only going to show you their properties, while a buyer’s agent considers your personal needs.
Find out if you are ready for the mortgage payment, by getting your financial situation checked out
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First you should gather references. You should have friends or relatives lined up to provide a reference. If you don’t have any, ask your broker as well as your agent to provide some, so you go in with a positive outlook when applying for your mortgage.
Clausen adds it is very hard as a first time buyer, since they don’t know who they are dealing with. Clausen further notes how it is important to find an agent who will “truly provide independent, quality advice that benefits the homeowner and not the agent that is looking to make a quick buck.” Clausen also states that this might mean hiring a lawyer when going through the purchase process, simply to ensure the entire process is impartial when buying your first home.
Clausen also notes how many first time buyers spend all or a major portion of their savings for a down payment; this is a detrimental mistake he points out. Many will pull all of their money together to put down that 20% to avoid mortgage insurance. However this is the wrong direction to go and can leave you short on cash for a rainy day.
Depleting your savings is very risky
With a conventional mortgage if you put down 20% you don’t have to pay for insurance on the mortgage. Although this can result in substantial monthly savings, Clausen says it isn’t worth “pushing the preverbial envelope” and not having funds set aside for a potential problem down the road. He says: “I’d pay for the mortgage insurance any day over not having enough money for a family emergency or loss of employment,” and goes on to note that everyone, especially the first time buyer, needs to have those funds set aside.
Prequalification has taken place, you have the perfect home lined up, you’ve signed a contract and close in 30 days. But, don’t get too excited just yet.
Why you should keep the wallet shut for the time being
Prior to closing a financial report including credit check is run, to ensure the financial situation hasn’t changed. If you have new loans on your credit report, this can jeopardize the ability to move forward with the purchase process.
Clausen notes how some buyers sign the contract then go buy a new boat or pricey furniture for the new home. He discusses a situation where a buyer drove to his office and showed him the new boat; Clausen went on to advise him to drive it right back to the dealership that day!
The dealership was kind enough to agree to afford that buyer a few more days, until the final credit check and financial history had been run on the home that buyer was ready to purchase. If this was not the case, it could have killed the deal. So before you get ready to start spending and financing big purchases, make sure you take a step back, and wait until those final checks are run, to avoid the risk of losing everything, only a few days before moving into your dream home.