We were due to close on our first home purchase early next week, but just found out that our insurance policy will cost us over a thousand dollars a year!  This will strain our budget even more than we expected and we’re having jitters about this.  What should we do?

It upsets me to hear that you “just found out” the cost of your hazard insurance.  Your Realtor should have urged you to find out what your policy would cost early on, during the home inspection period, and your lender should have been talking about this with you earlier, and not just days before your scheduled closing.

Even pre-dating the housing crisis and the credit crunch, insurers have way tightened up their policy qualifications years ago, at least as long as Hurricane Katrina (where all major insurers suffered huge losses) if not earlier.  So these days, for example, where the standard cost of a homeowner’s insurance policy for an average priced home in Portland (about $300,000) might have cost around $350 or $400 just a few years ago, that cost has risen in many cases to $500 or $700 or $1200 or even more.  Some Realtors may even write into the contract to purchase a home for their buyers that the offer is contingent upon the buyers being able to “find a standard homeowner’s insurance policy at a standard rate not to exceed ____.”

Without doubt, the losses suffered by many insurance companies have driven the rates way upward.  That is their excuse, anyway, and for those less disposed to feel good about insurance companies, many feel they are just greedy and/or exploitative.  But that’s another argument and what you need here is helpful advice.

It used to be easy and relatively cheap to insure homes.  Not always the case these days.  Many if not most insurers have placed odd, seemingly random and arbitrary restrictions or conditions before willingly granting an insurance binder.  Some companies will not approve a policy if the home still has fuses and has not yet upgraded to circuit breakers.  Other companies will not approve if there are minor glitches, like moss on a roof.  Some companies take a more painstaking look at the home and want an interior walk-through to rule out conditions which may be dangerous to people or the property itself, while many others are satisfied with just a few questions answered in a phone call.  It’s also important to realize that not only the home and property may present problems to insuring a home or insuring it affordably–the buyer and the buyer’s credit standing may impose serious restrictions on what kind of policy you can get as well.  IF you have a poor credit rating and/or if you have submitted multiple or serious homeowner claims in the past, this can be a stumbling block to getting quick, affordable coverage in the present.  This is why it’s so important to find out as much as you can early in the process.  The important rule of thumb here is that all insurers all different, with all different policies and issues and conditions known only to them–so, the important thing is to SHOP AROUND and find out what you can about alternatives in the marketplace.  Just in my last several transactions, the same buyers were given fairly drastically different quotes for nearly identical policies by different insurance companies and their agents; e.g., anywhere from $400 to $900 a year for the same home and similar coverage.

So Monday morning, get on the phone and start calling around.  You may well be surprised at what you’ll hear and the different offers you receive for coverage.  You may still have time to do this (most good insurance agents can put together a binder pretty quickly and get that to the lender without problems) before your scheduled closing.  If you can, you may want to ask your Realtor to see if an extension for a few days to the closing date can possibly be arranged without penalty to you. It doesn’t hurt to ask.  And it’s always reassuring to know, too, that you can Always change policies in the future if and when you find a “better deal” that meets your needs more satisfactorily.  Always feel free to contact me as well, and I’ll do what I can to provide some recommendations or references to good professionals out there.

And as always, be healthy and happy in your new home!

Zach Newman is an experienced, reliable and trusted Realtor in the Portland area. He is an agent for Re/Max Equity Group and he is a longtime member of PABA - Portland’s GLBT Chamber of Commerce. Call Zach at 503.287.8989 or visit his website at: www.equitygroup.com/zach

Comments RSS