How Homebuyers May Obtain Low Insurance Premiums

Homebuyers have a lot of factors to worry about, from fixed- and adjustable-rate mortgages to the insurance that will cover their property.

Those rushing to take advantage of the federal homebuyer tax credit should stop to consider the best insurance policy for their investment. A recent report by the New York Times offered advice on how to do this, starting with a thorough reflection on how much the house would cost to rebuild. Factoring inflation into this equation is also important, according to the report.

Requesting a claims history on a property can inform consumers about any previous problems it has had, including flood risk or fires. These reports come with a small fee but can help contribute to substantial savings over the years. Location may also have an effect on the premiums homebuyers will be forced to foot.

Certain natural events are not covered by traditional home insurance policies. To protect against water damage, homeowners will need to purchase a flood insurance policy through the federal government's National Flood Insurance Program. Earthquake insurance may also be added on to a traditional policy, with programs like the California Earthquake Authority offering premiums based on the value of property covered.

"You should consider if you're in an area prone to such disaster and weigh the cost with the risk," the report said. "Also not covered is damage caused by poor maintenance, mold or pest infestation such as termites."

Homes with new piping and wiring may come with lower premiums because they are less likely to fall apart and result in insurance claims. Homeowners may also be able to update these features and install smoke detectors, deadbolt locks and burglar alarms to reduce their rates.

Living near resources like a hydrant or professional fire department can decrease the amount of damage suffered from a natural disaster - and the premium faced by a homeowner. Consumers may also be able to reduce their home insurance rates by increasing their deductibles, according to the report. They may also be able to combine their home and auto insurance policies to create greater savings.

Making an inventory of their possessions can help homeowners file claims more efficiently and effectively. It may also shed light on items - like expensive artwork or jewelry - that may require more than the traditional home insurance policy.

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