In the chaos and excitement of buying a new house, it’s easy to settle for the first homeowner’s insurance quote you’re offered. Now that you’re a seasoned homeowner who’s thinking about refinancing, you may be wondering if you’re getting the best deal from your current insurance provider. Whether you’re refinancing your home in order to lower your interest rates, consolidate debts or improve your home, this is the perfect time to review your policy to make sure you’re getting the coverage you need at a competitive price.
Reconsidering Your Coverage
Most mortgage lenders require that you carry a standard homeowner’s insurance policy when you buy a new house or refinance your home. A standard policy covers your house itself, the outdoor structures on your land and your personal possessions. Your policy should also include liability protection, which covers your legal costs if a friend, a visitor or even one of those annoying door-to-door salesmen is injured or loses personal belongings on your premises.
Standard policies protect your property against the perils listed in your contract. A peril, the insuranceindustry’s favorite term for any incident that threatens your stuff, may include a fire, an electrical storm, water damage from frozen pipes, vandalism or theft. When you refinance, consider whether your policy provides coverage against common disasters in your state. Although most policies cover exotic events like aircraft collisions or volcanic eruptions, they almost always exclude floods, earthquakes, hurricanes and sinkholes. Excluded disasters must be covered with a separate rider.
Reconsidering your Home’s Value
If your home is destroyed by one of the perils listed in your insurance contract, the benefits from a standard replacement policy will cover the cost of building a similar house on the same plot of land. While the house is being rebuilt, your policy’s loss-of-use benefits will cover a percentage of your living costs while you’re staying in a motel or living in a tent on the beach.
When you refinance your house, you may need to adjust your homeowner’s insurance coverage to reflect your home’s new value. You may be pleasantly surprised to find that when you strained your back renovating the bathroom, you increased the value of your home. You’ll be less pleased to learn that your insurance provider may raise your premium to cover this improvement. However, your increased coverage will ensure that the time and money you invested in your new bathroom won’t go to waste if your home is destroyed.
Checking for Discounts
Refinancing gives you the opportunity to nab discounts that you might have missed when you first applied for insurance. Any changes you’ve made to increase your home’s security may lower your premium. A burglar alarm, an impact-resistant roof or new storm windows may make you eligible for a discount. Joining a Neighborhood Watch committee is an excellent way to stay out of trouble while reducing the cost of your insurance. With a new mortgage loan and an improved home, this is a great time to get an updated homeowner’s insurance policy.
Ultimately your decision on insurance coverage when refinancing, especially in this uncertain global economy resides on your ability to do your proper research and due diligence. The best insuranceoriginates from your preparation and knowledge of the subject.
Courtesy: cmvlive.com