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Make the right decisions regarding your home insurance when purchasing a new house

Posted On Thu, December 31, 2009

As soon-to-be homeowners continue to take advantage of the homebuyer tax credits to purchase new properties, many must also consider what types of home insurance plans will be taken out.

In order to help homeowners make the right decision about which insurance types to choose, the Insurance Information Institute has compiled a list of some mistakes consumers can easily make while contemplating plans.

One mistake the institute said many families make when finalizing a home insurance plan is to insure their property for its real estate value instead of the cost it would take to rebuild the house in the event of a catastrophe.

The institute added that many consumers incorrectly assume they can lower their coverage amount when real estate prices decline, and instead suggest that raising one's deductible could lead to substantial savings.

Homeowners who live in low-risk flooding areas and are contemplating dropping coverage against the natural disaster are also advised by the institute not to do so. Despite certain areas' slim chances of ever being hit with a flood, 25 percent of monetary losses from a flood occur in houses that are built in traditionally low-risk areas.

In order to check one's risk of falling victim to a flood before moving into a property, the National Flood Insurance Program can provide information on flood zones.

Additionally, those who do not own a home but do rent a property are also advised to purchase renters insurance in order to cover costs associated with moving in the event of a disaster while also providing liability protection.

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