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What Home Insurance Agencies Don’t Want You To Know

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As a home buyer or as an investor, there are so many things coming at you. You’re dealing with a mortgage and home insurance is required to get as part of the mortgage process. But a lot of times it’s overlooked as something that you really need to protect your investment with.

When purchasing a new or next home, you’re going to need the home insurance and would want to keep the cost low. Most home insurance agency gives new home buyers some information that they can take with them beyond the closing. That information helps buyers if they ever do have a claim and getting them to the closing table because that’s what they’re excited about.

Also Read: 6 Things You Must Know Before You Buy a Home in South Florida

Home Insurance

Your home insurance can vary by hundreds of dollars, depending on the insurance agency you buy your policy from.

What to look for when shopping for home insurance and how to keep the cost down?

THE COVERAGE

The home insurance coverage is the main portion of the policy that’s going to pay if you do have a claim.

For example, in the middle of the night, a pipe burst and you call the insurance company. That is not the best time to find out all the things that you’re not covered for. The best time to find that out is before you take out the policy.

Your insurance agency or company will give the coverage that you should have and the price to get you to the closing table. You can always increase the coverage later on.  But a lot of times it’s not just about the price. It can also be something regarding the roof or something else that makes a home not qualify for home insurance. As a buyer, you want to know that ahead of time. 

YEAR BUILT

The first thing that you want to know when looking for a home and the most affordable insurance is the year built. The magic number in the State of Florida for Palm Beach County is 2002 and newer. March 1st, 2002 to be specific. So if the permit for that home was pulled to March 1st, 2002, you’re going to get the credit for the building code and for the roof. And anything after 2002, you’re going to get the best rate, and for new construction, you’re going to get the very best rate. 

There are so many things that change from county to county. In Dade and Broward County, the magic number is 1994 because after Hurricane Andrew they change the building code to September 1st, 1994.

WIND MITIGATION

For homes built in year 60’s, 70’s, and 80’s, the solution to get your home insurance lower is to get a wind mitigation inspection. The wind mitigation is basically certifying how wind resistant your home is against a hurricane. However, the roof is the main thing that they’re going to be looking at if your home was built prior to 2002.

ROOFING

If you’re purchasing a home that’s built prior to 2002, you can still get affordable home insurance. You want to be looking at when the roof was replaced if it’s more than 15 years old that can be an issue. Check if the roof was replaced after 2002 because that’s the magic number.

WINDOWS, FRONT DOOR & GARAGE DOOR
In Florida, if you have hurricane shutters or opening protection, you will get a significant credit on your home insurance. But take note, you could have hurricane shutters all over your home, every window but if your front door is not hurricane rated, then you are not going to get that credit for anything.

The garage door is the biggest opening of your home. If the garage door is not hurricane rated, you’re not going to get the credit because it’s the biggest weakness in your home during a hurricane. 

So you want to make sure to ask questions to your realtor. Is the front door rated or the sliders rated and is the garage door rated as well?

Also Read: The True Cost of Homeownership

FLOOD INSURANCE

Flood insurance is an interesting thing all over the country. In Florida, we’re always struggling with flood insurance because the flood zones are constantly changing. While flood insurance isn’t mandated here, it’s a common requirement of mortgage lenders, particularly if you’re in a high-risk flood zone.

Flood insurance is determined by rising water. If you have a pipe burst in your home or if your dishwasher starts leaking, that’s a flood that would be covered under your home insurance. Now if there’s a tropical storm that comes with so much water that starts going up your driveway and all of a sudden you’re four inches deep in your home. That would be a flood but that is not covered under your home insurance even if you have hurricane insurance.

The entire state of Florida is a flood zone and it’s really sectioned off by two different things.

1.Preferred flood zone

Preferred flood zone just means that you’re in a lower risk zone. However, 20% of floods occur in those preferred flood zones.

2. Higher risk zone

That’s where you see your mortgage company requiring you to carry flood insurance.

All of Florida’s a flood zone, but you’re not required necessarily to have flood insurance. But you need to make sure if you’re paying for flood insurance because it’s something that you want to risk.

So how much is flood insurance?

Typically, if you are in a preferred zone it’s $482 for $250,000 worth of coverage. Now, if you need less coverage, you can opt-in for less and then the coverage goes down or the premium goes down.

What else can I look for to lower the home insurance cost?

Deductible

You can choose a little bit of a higher deductible. But if you’re going to increase your deductible, make sure you have an emergency fund because that’s when you’re going to need it during an emergency. If the deductible is 5% of the coverage limit, for example, $10,000, you might not realize that’s the insurance you’re signing up for. As long as you know and you feel comfortable with the coverage that you have, that’s fine. You can always increase your deductible if you can afford to do so.

You can also add an alarm system. If you have an alarm system, that’s going to lower your rate and the coverage limits. Just make sure that you’re not over-insuring your home.

For example, someone purchasing a home for $350,000 so they think, might as well ensure it for $350,000 but that’s not really the rebuild cost. The contractor would typically charge you to rebuild the home. So that doesn’t include land value. So really on a $350,000 home, you should not be insuring it necessarily for $350,000. It oftentimes is closer to $300,000 depending on if you have a pool or other things. 

BUILDING COST

Building costs are constantly changing in the market, especially when there’s a hurricane.

Prior to Irma and Hurricane Michael, things were pretty steady and hadn’t changed. And a lot of home buyers and homeowners were able to adjust the costs down because the building costs weren’t so high. At that time, it was around $125 a square foot. Now, on an average home with average finishes, it’s closer to $140 to $150 a square foot. Sometimes it can be more depending on the finishes – kitchen built-ins, kind of cabinets, kind of countertops and flooring. All those things make a difference in the square footage amount that you would be paying a contractor. If you have a fireplace or bookcases, that’s going to be more. But if you’re just looking on average, it depends on a lot of things, but it ranges $140- $150/sq.

Call a Home Insurance Agent for a second opinion

Call a home insurance agent to compare before you even purchase it. We always recommend getting a second opinion. You want to deal with someone that is a professional license in the state and preferably someone that lives in the State and is well versed in the market. When you’re looking at 2-3 homes, you should give a call at the insurance agency. The insurance agent can start running some quotes and just give you a ballpark scenario so that you know what to expect and review the inspections for you so that there aren’t any hiccups during the process so that you can get to the closing table.

Also, there are several insurance agencies that give a very small credit for a much higher deductible. Your home insurance agent needs to check and see what the options are and how much it is really going to save you. If it’s $160 a year, it’s not worth it. But a difference of a couple of thousand dollars is huge.

CONCLUSION

Whether it’s your primary home, an investment property, or just a seasonal property, make sure that you’re dealing with a professional that really knows the market and what they’re talking about the home insurance. Not all home insurance agencies are created equal. They have different experience levels. 

The state of Florida has a lot of different types of homes. Some are single-family homes, some are villas, and some are townhomes. So if you’re purchasing something that’s a townhome or a villa, make sure that you know what type of insurance you are required to have. 

Your lenders should know whether it’s an interior policy only where you’re just covering the wall coverings in and your flooring and your countertops in your furniture. Or if you need a single-family home policy, even though it’s a townhome or a villa, you might have to be covering the entire thing, including the roof. 

FOR MORE INFORMATION, LISTEN TO THIS TOPIC IN OUR PODCAST!

As a home buyer, you might forget about the home insurance once you have moved into your new home. And then when a claim happens, that’s when people end up paying the most. On this podcast episode, we will explain all the tips and tricks to home insurance and what to look for. You will not want to miss this episode!

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