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Homeowners Insurance Basics

January 25, 2024

Finding the right homeowners insurance is an essential part of the home-buying process in Bozeman.  Homeowners insurance varies depending on the provider you choose and what type of home you’re buying.  In this blog, we’ll take a look at some important aspects of choosing coverage and things to be mindful of when comparing providers.  This is meant to be an introduction and is not comprehensive.  Be sure to talk to an insurance professional you trust!  Want to know how to factor insurance into your monthly payment estimate?  Visit our FAQ section to learn more.

 

Homeowners Insurance and Property Type

The type of insurance you get depends on the type of home you’re buying.  There are different policies for condos, townhomes, and single family homes.  Most condos are unique in that you will be buying what’s called a “studs-in” policy.  This means you are insuring only your unit from the studs in, which excludes the exterior and common areas of the building.  Your building’s master policy takes care of the rest.  Single family homes require the most coverage.  Townhomes are in the middle because you share one or more walls with a neighboring unit, but you are still responsible for some exterior aspects.

 

Coverage Amount

The bulk of the cost of your homeowners insurance policy is going to be your dwelling coverage.  In the simplest terms, this number is what you would receive to rebuild your home in the event of a total loss.  The key with this number is that it needs to reflect the replacement cost.  This is how much money it would take to rebuild the home- think contractors and raw materials- and NOT how much the home is worth or how much you’re purchasing it for.  If you get a quote and your dwelling coverage is the purchase price or appraised value, be sure and bring this up to your agent or representative and make sure they are using a replacement cost estimator to properly determine your dwelling coverage.  Don’t get any illusions about rebuilding a bigger or nicer home in the event of a loss; your insurance company will only pay to replace what was there.

 

Homeowners Insurance Deductible

If you’re going to pick two easy things to pay attention to in an insurance policy, the coverage amount and deductible are it.  The deductible is the amount you pay out of pocket for a claim before your coverage kicks in.  Having a lower deductible means less out of pocket, but a higher premium.  The opposite is true for a higher deductible.  This is where having a trusted insurance expert counts.  They will help you find that “sweet spot.”  It’s easy to think a lower deductible is always better, but think about the claim-filing process.  Your insurance typically goes up when you file a claim, so there’s no incentive to file lots of small claims for things that happen to your home.  That means you’ll likely be paying that deductible very infrequently, if ever!  The monthly cost of having that lower deductible could quickly eat into any potential savings filing a claim when you think about the time involved.

 

Compare Homeowners Insurance Quotes

Like we mentioned earlier, be sure to talk to a homeowners insurance professional you trust.  Our advice: stay local!  Get at least one quote from a local agent to compare.  They know their market better than anyone.  Your realtor or loan officer may also have good referrals for you.   When comparing quotes, make sure the majority of variables are the same, especially the dwelling coverage and the deductible.  When these two items are the same, you know you’ll be comparing apples to apples instead of apples to oranges!  Your realtor, loan officer, and insurance agent are here to help and to make sure you have what you need what you don’t.  Use them!

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