An educated home buyer must consider insurance & maintenance costs before making a purchase offer. Buyers ask about property taxes, quality of schools, neighborhood amenities but rarely do they consider future insurance and maintenance costs of owning a particular home.
Here are 9 Insurance Tips BEFORE you buy:
1. Get a copy of the home’s insurance claims/loss report.
This number one piece of advice may save you from buying a high insurance risk house. Any homeowner claims made within the past 5 years will be in the report. The better the claim record, the cheaper your insurance is likely to be. It may also indicate the risks the home may have (water infiltration). Two websites that offer FREE insurance history/loss reports are ChoicePoint.com (CLUE report) and Insurance Services Offer (ISO.com) (A-PLUS report). We have not used either and would welcome comment from anyone who has.
2. Know the home’s construction.
If you plan to live in areas that are natural disaster prone, a home’s construction will impact the cost of insurance. Insurance will likely be cheaper if you buy a brick house in a hurricane prone area. In an earthquake risk area, an older home (built to older building codes) may be more expensive to insure than a newer one built to more stringent code requirements.
3. Know the age of the house.
Can be a factor for tip number 2 as well as impacting the replacement cost, and therefore the insurance cost, of ownership. Certain features of older homes, such as wooden floors and plaster wall/ceiling construction may be more expensive to replace than the components of newer built homes. Old wiring may increase the risk of fire, old plumbing risk of water leaks. Older homes may also have more/higher maintence costs.
4. Know the overall condition of the house.
A fixer-upper or home that needs repair of major components may be cheaper but the insurance costs may be higher. An old roof, for example, may add to the risk of water damage.
5. Identify the home’s saftey systems.
Insurer’s will discount rates for burglar, smoke & fire alarms. The added security of high end locks, even simple deadbolts, may also reduce the risk of burglary & therefore insurable risk.
6. Identify location of fire stations.
Is the nearest fire department down the street or across town? Insurers take this “unzillowable” into account. Does the home have a sprinkler system to reduce insurable risk?
7. Check for high risk amenities.
The obvious one is a pool, for the personal liability risk associated. Is it fenced and in compliance with local codes? Many homeowners have pools installed by contractors who may be lax in getting proper permits from the building department. You may even lose coverage if the insurer learns of this when you submit a claim (God forbid) and Murphy (of Murphy’s Law fame) will tell you this is what is will happen if you didn’t check beforehand. But others high risk amenities can include wood burning stoves or fireplaces.
8. Ask to speak to the homeowner’s insurer.
One, this lets you know the home is insurable and second, a call to them may alert you to unusal insurance risks associated with the home, the same you will face if you become the homeowner.
9. Get a home inspection. Experts will uncover any home features/conditions that lead to higher insurance costs as well as repair. Check the unseeables like septic systems and underground oil tanks. Knowing these will keep you from buying a money pit and can be useful in negotiating a better price.
Source for this post: Insurance Information Institute.
For Rental Agents & Landlords: FREE Tenant History Reports are also available through ChoiceTrust.com.
I got my CLUE report last week from ChoicePoint.com. It came back as clean, no claims, despite my having a claim for a damaged roof (including water damage) two years ago.
Thanks John for your first hand information. That’s interesting. I would think the omission could lead to a lawsuit if some buyer relied on it to their loss. I hope some others comment on their results with loss reports.