Provided by Diana Fennelly
Private Client Group
William H. Connolly & Co. Insurance and Risk Management
dfennelly@whconnolly.com
973-650-9515
When should buyers begin looking for homeowners insurance?
Homebuyers should start the process at least one month prior to the closing. Mortgage companies require proof of insurance and a receipt showing that the first year is paid in full at the closing. We can usually bind a policy in a few days depending on the company that the homeowner selects but mortgage companies like to see the proof of insurance at least two weeks prior to the closing.
What information does a buyer need in order to purchase insurance?
We need personal information about the purchaser such as name, address, occupation and place of work. We also require one of the insured’s social security numbers as many carriers do soft credit checks. Fortunately, most purchasers have their credit in good shape as they are also applying for a mortgage so this doesn’t usually present a problem.
We also need as much information about the house as possible such as the year the house was built, accurate square footage including the basement and attic space as well as the porches and exterior space. We ask how many bedrooms and baths, fireplaces, size of garage and whether it’s attached or detached.
Carriers are especially interested in the age of the roof, hot water heater and whether or not updates have been made to the electrical and plumbing. Updates to these areas can sometimes lessen the premium.
Also key is whether or not the buyer has made any claims on his homeowners insurance in the last 3 to 5 years.
Once we’ve gathered all the information we have a conversation about the client’s budget as well as what is appropriate for the property and value. We use the information to pull quotes from various carriers and present the options to the buyer.
Will an agent need to see the house?
Usually not but we are happy to come out and see a property if the buyer asks. The inspection report can provide us with details.
What things impact the ability to get insurance and the price of insurance?
Good credit can affect a premium as well as the age of the home and whether or not updates have been made to plumbing, electrical and the roof. Two or three family homes need to be placed with specific carriers. Some carriers won’t insure a home built before 1900 or homes with knob and tube electrical. Our most difficult to place clients are those who have been non-renewed by their current carrier either for non-payment or having filed too many claims in a certain amount of time.
One of the key determinates of premium price is whether or not the carrier provides “guaranteed replacement cost” in the event of a catastrophic loss (usually due to fire). More basic carriers cap replacement costs at about 125% of the dwelling amount listed on the policy. High end policies do not cap replacement costs but they do appraise the properties more carefully and the policies can cost more. These high end policies offer broader coverages as well.
Are there options in terms of what to insure for and for how much?
Policies are renewed annually at the discretion of the carrier. A basic policy covers the “dwelling” amount (the actual house), the “contents” (all the stuff that would fall out if you were to hypothetically turn the house upside down), “other structures” such as the garage and walkways and liability (medical payments should someone who is not actually living in the house have an accident on the property). Policies also have other built-in coverages such as “loss of use” or coverage to live elsewhere should you be displaced due to fire or some other catastrophic loss. Optional coverages for things such as jewelry, umbrella (also known as excess liability) as well as auto insurance are also available.
One of the most confusing aspects for homebuyers is when the dwelling amount is different or higher than the purchase price. Policies that offer guaranteed replacement cost will value a house based on their ability to rebuild should there be a catastrophic loss. This rebuild includes such things as removing the debris, re-digging the foundation, the use of an architect, building green and rebuilding the home exactly as it was before. As a result the insurance appraisal can be quite different from the market price that is often based on the location, school system and what the homes around it have sold for.
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