You’ve spent months researching the Maplewood and South Orange, New Jersey, area and finally found your dream home. Your offer was accepted, the home inspection went through with flying colors, you’re out of attorney review, and your mortgage has been approved. Besides hiring a mover, picking out paint colors, and ordering change-of-address cards, thankfully there’s not much left on your list of things to do before you close. But don’t overlook the importance of buying the appropriate homeowner’s insurance. Here, Sean Colrick of Cedar Risk Management and Insurance Services in Flemington, New Jersey, gives us some valuable tips, whether you’re buying your first home—or your fifth.
What does a home buyer need to know about homeowner’s insurance?
According to Colrick, there is no such thing as “one-size-fits-all” when it comes to homeowner’s insurance. Rather each policy is specific to a person’s individual needs. The homeowner needs to be made aware of the various coverages and endorsements available to him or her. “The best way to find out what these coverages are and what applies to his or her specific needs is to take the time to speak with a licensed specialist, who can tailor a policy just for the home buyer,” Colrick adds.
Can my mortgage company dictate the amount of coverage I have?
Yes and no. “Although a mortgage company may require a minimum amount of dwelling coverage, which would cover the amount of the loan,” Colrick says, “the actual limits of coverage are determined by the home itself and factors of the person purchasing the insurance.” Dwelling coverage is determined by the cost to rebuild the house with like kind and quality materials, which in some instances is more than the actual purchase price of the home. This occurs more often with older homes, which may be a scenario that you’ll run into with your South Orange or Maplewood home.
Are there any situations where I may run into trouble getting coverage?
“Yes, there are certain scenarios that can cause problems for a homeowner,” Colrick says. “For example, some insurance carriers will not insure a homeowner that has certain breeds of dogs.” Since dog bites are a major financial burden for the insurance industry, a number of companies may deny coverage to households that have one of the following breeds:
- Pit bulls
- Staffordshire terriers
- German shepherds
- Chow chows
- Doberman pinschers
- Wolf hybrids
- Great danes
- Alaskan Malamutes
- Siberian huskies
Other red flags include whether a home has a pool, diving board or a trampoline. Distance from other homes can also be a factor, as well as distance to bodies of water.
“One major factor, which I see more than any other, however is credit,” Colrick says. “Credit is a factor in determining someone’s ‘insurance score.’ People with poor credit have fewer options and may end up paying more.” All of these factors are reasons to speak with a licensed representative, who can guide you through the insurance process and be your advocate.
Do I need to purchase flood insurance?
“Flood Insurance is a type of insurance that protects against flood damage,” Colrick explains. “A normal homeowner’s policy excludes flood damage as a covered loss, which is why it has to be purchased separately.” But not all houses will need flood insurance. Your mortgage company will only require the purchase of flood insurance if the home you’re buying is in a certain type of flood zone.
How much coverage will I need?
“Generally in Maplewood and South Orange, homes tend to be between $400,000 and $1,000,000 for reconstruction cost and no less than $500,000 dollars in liability,” Colrick advises. “And there should be appropriate levels of jewelry coverage, liability coverage, and water backup as the main coverages.” Always ask what is covered under a policy and what isn’t. It is important to give the agent as much information as possible, because everyone has different circumstances. Don’t assume an agent knows your particular circumstances.
What is not covered by homeowner’s insurance?
Each insurance company is different in the types of coverages that are not covered under their policies. Under most circumstances, flood, terrorism, and war are excluded under a homeowner’s policy. “It is always good to find out from the agent what is excluded from a given policy,” Colrick says. “Also, find out what the individual coverages are for: water backup, if a sump pump is required for the coverage, as well as what amount of jewelry is covered within a given policy.”
Do I need an umbrella policy as well?
An umbrella policy gives coverage for excess liability on top of what is automatically given in a homeowner’s and automobile policy. “In most cases, a homeowner should consider purchasing an umbrella policy,” Colrick advises. “Like most insurance conversations, it is a consultation to determine how much risk and exposure you may have, and that will determine the limit a homeowner is comfortable with. You must also remember that it isn’t only about how much you can be sued for and lose now, but how much you can lose in the future with wage garnishment up to 50%, until the debt is paid.”
Should I shop around for coverage?
It’s wise for a homeowner to look at multiple carriers to help find the best mix of rate and coverage. “For this reason,” Colrick says, “I suggest a homeowner speak with an independent insurance agent. Independent insurance agents work with dozens of insurance carriers and can do the research on behalf of the client, to find what is right for them.”
How can I save money on my homeowner’s policy?
Many companies in the marketplace will give credits or discounts for certain criteria. According to Colrick, these include how new the roof is, if the home has a security system for both burglary and fire, or if there is a backup generator in case power is lost. “Another large credit many companies give is for packaging your insurance together,” Colrick adds. “This is where you put your auto insurance together with the home, as well as any other lines you may have such as umbrella and jewelry. This can save you hundreds of dollars.”
Allison Ziefert is Maplewood, NJ based realtor and the #1 individual real estate agent at Keller Williams Mid-Town Direct in Maplewood, NJ. A local market expert, Allison specializes Maplewood, NJ real estate and homes and South Orange, NJ real estate and homes as well as Millburn/Short Hills, NJ, West Orange, NJ and surrounding towns. Allison’s success as a Maplewood/S. Orange realtor is driven by earning great testimonials from sellers and buyers of homes her marketplace. You can read her testimonials at www.azhomesnj.com/testimonials