When buying your first home, there are so many decisions to be made before, during, and after closing on the deal. You'll need to decide on a mortgage lender, and the lender will require you to get home insurance coverage. It's important that you have a good understanding of the various decisions you'll need to make when it comes to your home insurance coverage, as the wrong decision now could cost you a lot in the future. Here are a few things to understand so you can make the right decisions for yourself in your new home.
High Deductible vs Low Deductible
One thing you'll need to consider that can affect your insurance premium is how much of a deductible your policy would have. How much can you afford to pay out of your pocket before the insurance coverage kicks in when/if you need to file a claim against the home insurance policy? If you can afford to pay a higher deductible in case something happens, your premium will be lower. If you can't afford to pay a high deductible, your premium will likely be a bit higher.
When you're trying to make this decision, ask the insurance agent what the policies are regarding making changes to the deductible in the future. Are you able to make changes at any time, or do you have to wait a certain period of time before doing so? This is particularly something to think about if your employment is seasonal in nature and you may not have the same cash flow to cover deductibles year-round.
Replacement Cost vs Actual Cash Value
Another thing you'll need to decide on is whether you want to be compensated with replacement cost or with the actual cash value of items that you will have in your home should the items be damaged or lost in some way. If you choose to be compensated with the replacement costs of your furniture in the event of a fire, you'll be able to buy new furniture. However, if you choose the actual cash value of furniture that you've had for years, you'll be given the cash value of old furniture instead.
While many people would prefer to replace the furniture with new furniture and, therefore, select replacement costs before finalizing their home insurance policy, this option generally involves paying higher premiums. So, think carefully about whether or not it'd be worth it to pay more insurance premiums to be able to get the replacement costs of items instead of the actual cash value.
For more information about home insurance, contact a local company.
