© Diane Macdonald/Getty Images
But just keep in mind that perky woman from the insurance commercial and the mantra she chimes: "Isn't getting discounts great?! … Yes!"Admittedly, insurance doesn't top the list of considerations in the hunt for a new home. It's not as if buyers spend hours ogling nifty premiums on the home and garden channels.
Bone up on the insurance breaks now — when choosing a home — and it could mean thousands of dollars pocketed every year for use on the fun projects down the road. Often, things about the home itself can affect your insurance rates — factors that are costly, if not impossible, to change later.
Below, experts outline 10 factors that make the biggest impact. Study up on these, discuss the details with your insurance agent and keep them in mind when you're evaluating homes to buy.
1. Is the area susceptible to hurricanes, mudslides, wildfires or other natural disasters?
Natural disasters have become so costly that many large insurers now refuse to provide homeowners with coverage in certain high-risk areas. Buy within a half-mile of brush in wildfire-prone California, for example, and you may be forced to shop smaller, high-risk insurers, which might charge three times more, independent agents say.
The same might go for coastal areas or steep slopes. Buy in, and it could mean an extra $3,000 or more in premiums every year — for as long as you're there. The average cost of a homeowners insurance policy is projected to be close to $900 for this year, according to the Insurance Information Institute.
"It can be a big, big problem if you get in a situation where none of the big companies want to insure you," says Tim Gaspar, owner of Gaspar Insurance Services, an independent agency outside Los Angeles. "You have to go to a high-risk company, and they can charge whatever they want to charge you."
Tilmon Brown, a developer who remodeled an old brick firehouse in Mobile, Ala., for his own family, learned after years in the house that his insurance company had canceled wind coverage because of high costs of hurricane repairs.
Never mind that his solid structure has withstood hurricanes or that he couldn't find an insurer offering the coverage. The state finally set up a wind pool, for which he pays $2,100 a year on top of his $700 homeowners coverage — a total more than quadruple his previous annual bill.
Brown says he'd opt out of the insurance, which has a $50,000 deductible, but his lender requires it. Some buyers in high-risk zones where state pools aren't available have been unable to close on home sales.
If the home is susceptible to floods or earthquakes, you'll need a separate policy no matter where you live.
2. How's the roof? New? Wind- and hail-resistant?
If the roof — or the plumbing, for that matter — has not been updated in 25 years, you could also have difficulty getting into anything but a high-risk, expensive insurance group, Gaspar says.
"Unfortunately, you'd be limited with what insurance companies are willing to deal with it," he says. "It's not even a price issue."
If the roof is new and it's constructed of impact-resistant material, you could qualify for a discount if it's an area subject to hail or high winds. The amount of the discount varies but could be as high as 20%, says Dick Luedke, a spokesman for State Farm, the largest provider of homeowners insurance in the country.
The same principle applies to construction under the roof. Masonry, for example, is more likely to withstand nature's forces and so is considered less risky, eligible for perhaps another 10% discount, Luedke says.
3. Is the plumbing new?
Ditto on the plumbing. If the system is a quarter-century old or has had unresolved problems in the past, insurance providers will be wary.
"Companies are scared to death of water claims because they can lead to mold, and mold is very expensive to remediate," says Bill Wilson, vice president of education and research for the Independent Insurance Agents & Brokers of America, a trade group.
If the home inspector reports leaky pipes, it might be wise to request additional information, or even upgrades, prior to purchase.
4. Does the electrical system meet current code?Unlike the plumbing and the roof, the electrical system doesn't need to be replaced to qualify for a good insurance rating, agents say. But it does need to have been updated within the past 25 years to meet current codes. That means circuit breakers; no old-fashioned fuses.
5. How far away is the fire department?If the home is more than five miles from a fire station, your rates will likely start rising, says Dawn Roberts, general manager of LeDoux Insurance Agency in Eugene, Ore. They might jump by 20% to 240%, depending on the home's distance from a station or hydrants.
State Farm doesn't measure the distance; it looks at whether homeowners in the area have submitted claims for fire losses.
"If there are a lot more State Farm fire claims in a given year in a given area, then the risk is greater," Luedke says. "We believe it's more accurate that way. If you rate how close you are to a fire department, you're not taking into account the proficiency of the fire department."
So how do you get access to the claims history of an area? Well, it's not likely that a private company in such a competitive industry is going to turn those data over for public consumption. But buyers can ask insurance agents to draw up estimates based on different variables and from different companies.
Perhaps the neighbors submitted recent claims, driving State Farm's rate higher, but a nearby fire station pulls down the rate with another company.
"Homeowners insurance has always been very competitive, so the tried-and-true way to save money is to shop around," says Jeanne Salvatore, senior vice president and consumer spokeswoman for the Insurance Information Institute.
6. How is the neighborhood?
If that sounds vague, well, that's intentional. Unfortunately, customers simply don't have access to information about some variables that affect insurance rates. One biggie is the nature of claims filed in the neighborhood.
Sure, maybe you're buying a new brick house on a hill with a gated entrance and a top-notch security system. But if all the old straw houses in the mud down below have filed insurance claims recently, you could get stuck with a high-risk marker, too, although your discounts would help.
"We have some companies that have maybe 100 different levels. All of the information goes into this black box," says Roberts, the independent agent. "The insurance industry has changed so much in the last few years, you can no longer guess at what the rate might be."
So what can the customer do? As mentioned in No. 5, you can ask the agent to punch in different variables, to see which factors tend to alter the rates. If it's the neighborhood — say a high-crime area — that is driving up the rates, the insurance agent or real-estate agent should be familiar enough with the issue to give you a heads-up.
7. How new is the home?
A new home has new utilities — and will trigger a giant sigh of relief from insurance companies. Discounts for a new home can be "very substantial," Luedke says — up to 30% in some cases.
Remember that new-home discount will gradually decrease, probably a percentage point or two every year, until it eventually expires, Roberts says.
Another factor to consider: Old homes with ornate features can have high replacement costs. Insurance is intended to pay to restore the home to its former state. New features are easier to locate and often cheaper to buy.
8. Has the home been well-maintained?
An independent insurance agent will visit the home before processing a claim. At the least, an agent with a big insurance company is going to drive by. The abandoned car, the unkempt lawn, the dilapidated porch, the peeling paint — all are indications that the prior owner didn't have "pride of ownership."
The concern, of course, is: What else is falling apart?
What should you do? Obviously you can quickly clean up cosmetic flaws. But you also need assurance that the home has not been subject to deeper neglect.
In addition to the home inspection report, ask the current homeowner to provide a “comprehensive loss underwriting exchange,” a history of insurance claims on the property. Check to see whether there were problems with the home and, most critically, if they were repaired. Some buyers with spotless claims and credit histories have been unable to insure a home because of the home's tainted history.
9. How secure is the home from burglary?
A burglar or fire alarm that automatically generates a call to a security company or fire station can mean a 5% to 10% discount on your premium. If it's in a gated community or in one with its own security measures, additional discounts may be available.
Some insurance companies even consider whether your home is visible to neighbors or passers-by; visibility reduces risk.
10. Is a swimming pool on the property?
An empty pool should be a deal-breaker, Gaspar says. An insurance company likely will require that the pool be covered or filled before it will provide coverage.
Even then, you'll need a solid fence with a locking gate. The premiums likely won't be much higher for a pool or hot tub, agents say. But, as a new buyer, building an adequate fence immediately is an added cost to consider.
Dated Issued: By Karen Aho of MSN Real Estate Taken from: http://realestate.msn.com/article.aspx?cp-documentid=26098407&page=2
