10 Things You MUST Know Before GETTING A QUOTE for Your Homeowners Insurance

  1. Start early. The day you have an accepted contract for a house is the day to start researching your insurance options. The earlier you start, the better a chance you’ll uncover any potential issues before your 15 day “walk away” window closes. Also, there can be repairs or other requirements which you may not be aware of until you speak in detail about your situation with an agent. Uncovering those early means you may be able to include those items in your negotiations.
  2. All “quotes” are not equal. Even if the coverages appear the same. There are a few basic coverages most individuals use to compare the estimates. However there can easily be a half dozen optional coverages (the fancy insurance term is endorsements) which could be included on one estimate, but not on another. It’s important to have a experienced agent review any estimates with you in order to make sure they are as similar as possible.
  3. Getting a “quote” is not enough. A quote does not mean you’ll be able to apply for that policy or get it issued after closing. If you get a quote and it takes less than 10 minutes, there are lots of important qualifying questions that haven’t been asked. Many insurance companies and agencies simply try and quote as many policies as they can while asking the minimum number of questions to give a reasonably good guess at a rate. This can be problematic later when you go to complete an application and something comes up (like the dog you have, the roof pitch, or car that was repossessed 4 years ago) which then disqualifies you from coverage with the company which was initially quoted. It’s important your agent ask you many questions up front to get any of those issues dealt with early. As soon as you decide which option to choose, tell your agent you want to “complete the application” which will (hopefully) prompt them to ask all the additional qualifying questions.
  4. Your lender needs your insurance documents early. Often your lender will want your insurance information 10-14 days before closing as they have to put together all your paperwork and send it through to underwriting in order to get the required documents in place for closing. Because a loan package will have quite a few documents to review, and since they’re on the hook once they lend you the money, it can take several days to get it reviewed. The sooner you have your insurance documents to the lender the better.
  5. The age of the house may cause you to need specific inspections. Many companies will require the homeowner to provide a “4-point inspection” in order to complete their application for coverage and get a binder for closing. a “4-point inspection” is an abbreviated version of a home inspection which only addresses the 4 major systems of the house, Roof, Plumbing, Heating/Air, & Electrical. This helps the insurance company make sure they are writing houses which are in good condition. Many companies require the “4-point inspection” if the house is 30 years old or more. However, one may be required for houses under 30 years, so it’s best to check with your agent on your specific situation. The earlier the better.
  6. Policies have limitations and exclusions. Make sure you talk with your agent about anything which you want to make sure is covered. Because so many homeowners focus solely on price (and why shouldn’t we, that’s all we often hear) many agents only discuss price. It’s also much more fun to talk about what is covered, instead of what isnt covered. The standard home insurance policy has many common limits such as a $1,000 limit for theft of jewelry or a $2,000 limit for theft of firearms. There are several more worth discussing, but these are ones which can easily be fixed and are OFTEN not enough for the typical household.
  7. Companies underwrite your policy AFTER closing. At closing, you’ve received a “binder” of coverage. A “binder” is just temporary proof of coverage which indicates you’ve completed the application. After that, the insurance company will gather all the documents, application information, inspections, etc and review it for accuracy and make sure your property fits their guidelines. If the application isn’t fully completed, if they find issues with the property, or if some feature of your property is ineligible for coverage with them, they have the ability to cancel your policy within the first 120 days with 20 days written notice. This is another reason to make sure your agent is knowledgeable and experienced enough to help place you with a company that will accept your application.
  8. Pay attention to your deductibles. A deductible is the amount of damage you would be responsible to pay if there were a claim. In Florida, there are generally two deductibles on a homeowners policy. One applies only if damage is done as a result of a Hurricane, and is (surprisingly) called the “Hurricane” deductible. The other is what would apply for everything else and is referred to as the “All Other Perils” deductible (or AOP for short). Most commonly we see deductibles of $1,000 for All Other Perils and a Hurricane deductible of 2%. The percentage is of the total dwelling coverage. So, for example, if you have $100,000 as the dwelling coverage on a property, a 2% hurricane deductible would mean you’d be responsible for the first $2,000 of hurricane damage.
  9. Flood damage is excluded. Flooding is completely excluded from almost all property policies. Keep in mind, flooding as defined by FEMA is, “A general and temporary condition of partial or complete inundation of 2 or more acres of normally dry land area or of 2 or more properties (at least 1 of which is the policyholder’s property)…” In other words, if you see water all around and in your house, that’s likely a flood and not covered. If a pipe in your wall burst, or the sink overflowed, or water came in through a broken window and “flooded” the house, that is not a “flood” as defined by FEMA and the homeowners or flood policies.
  10. Know who you’re speaking to. What I mean is, know the relationship between the person you’re speaking with about the quotes, and the actual insurance company they are offering. If you’re speaking to a captive insurance agent or a company who sells directly to consumers, you’re speaking to someone who (generally) only has one company to work. And if they don’t have one company, they generally have a significant incentive to put you with one option they have over another. If you’re speaking to an independent agent (like us), you’re talking to someone who has relationships with multiple companies, and can offer you several different company choices based on your specific situation. That way, if one company has relatively high rates, or doesn’t have the coverages which are appropriate for you, they can use another that better fits your needs.