Why You Must Buy Home Insurance Before Closing on a Home

Buying a home isn’t as exciting of a process as it may look like on HGTV. It involves a lot of paperwork and finances to bring you to that happy closing day. For most homeowners, lenders are required to help them obtain the home of their dreams, unless you happen to have enough cash to purchase the home in full. However, if you are like most people, here’s what you need to know about buying home insurance before closing.

 

Do I Have to Buy Home Insurance Before Closing?

Just in case you are still thinking you can get out of home insurance, yes, you do have to purchase it for at least a year in order to close on your home. In order to protect their investment (your new house), lenders will require you to cover your home against disasters. Until you have paid off your mortgage, your lender as the stakeholder has the right to hold possession of your property to protect what is technically their property. Home insurance is designed to protect both you and the lender, which is why lenders typically will not agree to lend you the money for your home until they know it will be protected.

 

How Much Coverage Do I Need?

Home insurance policies can protect your physical house, your belongings on the inside, and the cost of medical expenses for a person injured on your property. The amount of coverage you need typically depends on your lender. However, the general rule is that you need enough to cover the cost of rebuilding your home from the ground up in case of disaster.

 

A standard home insurance policy will protect you against:

  • Damage from the weight of ice or snow
  • Explosions
  • Falling objects, such as tree branches
  • Fire
  • Frozen plumbing, heating, AC, or other household systems
  • Hail, windstorms, and lightning
  • Smoke
  • Theft and vandalism
  • Vehicles

 

By having homeowners insurance, you and the lender are protected in the event that the house is damaged or destroyed. Additional coverage can also be added such as flood or earthquake insurance, depending on your situation.

 

Types of Homeowners Insurance

 

Replacement-cost policy–  This type of policy covers the current cost to replace your home. For example, if you were to buy an older home that has unique features, the cost to restore it may be higher. A replacement-cost policy will cost more than a cash-value policy, but will cover the cost of rebuilding.

 

Cash-value policy– This type of policy costs less than a replacement-cost policy and covers the market value cost of your home and its contents. So rather than reimburse you the amount you paid for something, you will only get back its depreciated value amount, which is not something that Langlois Insurance Agency recommends.

 

While some types of insurance may be optional, homeowners insurance is a must if you want to own a home.

 

Please allow Langlois Insurance Agency to find the best policy with the right coverage and price. Let us know how we can help you by giving us a call today at #815-485-2106.  We are always happy to hear from our customers.

Warmest Regards,

Matt Langlois

matt@langloisinsurance.com

Market Value vs Replacement Cost: Which Amount Should I Insure?

Before purchasing a home, you are required to purchase homeowner’s insurance as well. But how do you know how much to insure your home for? Most would think that they need to cover only the price they pay for the house. However, that price isn’t enough coverage to pay for your home in the event of a disaster such as a fire or storm. In most cases, your home’s real value is greater than its market value. That is because market value deals only with the buying and selling process, not rebuilding. And rebuilding costs are much more than the costs to build a home from scratch due to costs of demolishing/cleaning up the existing home, not being able to buy in bulk for supplies, and labor for a single rebuild versus multiple.

So which amount of coverage do you go with? Depends on the risks you want to take. Below we will go over the differences between a home’s market value and replacement cost, followed by the best option we recommend for the average homeowner’s insurance policy.

What is Market Value?

Market value is the price a home can sell for in its current condition. Knowing this price is beneficial when buying or selling a home, but not necessarily for rebuilding. As we said already, there are a number of factors that cause rebuilding the same home to be much more expensive than the home’s market value. Market value is affected by factors such as the location of the home, crime rates in the area, amount of land, proximity to schools, and the availability of similar homes. The most important detail to note about market value is that the price is rarely high enough to cover the cost of rebuilding it since materials and labor costs could be more than when the house was built and one-time jobs are typically more expensive.

Benefits and Risks to Insuring Your Home at Market Value

Benefits: Occasionally, a home may be worth more on the market than it would take to rebuild such as if the home were historical or consisted of elaborate artisanal work that would be worth a lot of money. If you have a home such as this, you can choose to purchase a historic home policy, but these are often more expensive. To save money, you could insure your home based on the market value in order to recover after a loss.

Risks: If your home’s value isn’t placed in the history or craftsmanship, insuring your home at market value puts you at risk for not being fully covered in the event of damage to the house. You would be required to pay the difference between your home’s rebuilding cost and market value in order to rebuild. The only other alternative would be to build a less expensive home elsewhere.

What is Replacement Cost?

Replacement cost is the amount of money it would take to rebuild your home after being destroyed. Coverage at this price will insure your home for the cost to repair any damage or even rebuild your home at the current prices. A building contractor can help you estimate the replacement cost of your home based on the property’s structure and associated items as well as costs such as plans and permits for rebuilding, labor, materials, fees, and taxes. Keep in mind that the land value is included in the market value only, not the replacement cost as the land will not have to be rebuilt.

Benefits and Risks to Insuring Your Home at Replacement Cost

Benefits: You will be able to experience minimal financial interruption should your home be destroyed. If you go with this option, it is best to insure your home for 100% of its estimated replacement cost.

Risks: The cost to rebuild your home can vary over time. There is no guarantee that you will be 100% able to rebuild your home at the estimated replacement cost. To increase your chances of keeping your home fully covered against destruction, we recommend reviewing your policy annually to make sure your amount of coverage is still appropriate for you. Factors that can affect your replacement cost include home upgrades and improvements, market conditions, labor and material costs, and transportation prices. For the maximum amount of protection, you can consider a policy that includes an inflation clause to automatically adjust and account for changes in construction costs.

Insuring Your Home

Unless you believe otherwise based on the benefits and risks listed above, insuring your home for its replacement cost is typically the best and safest option. While, yes, insuring your home for its market value is cheaper now, you will be more adequately covered down the road should anything happen to your home.

Ultimately, when you make your decision, research all your options and please talk to any of us at Langlois Insurance Agency about your situation.

As always, please don’t hesitate to give me a call with any questions or comments — I always love to hear from my customers!

Warmest Regards,

Matt Langlois

matt@langloisinsurance.com

Do I Need Water & Sewage Back-Up Coverage?

Do I Need Water and Sewage Back-Up Coverage Insurance?

Whenever the weather shifts in the Midwest from beautiful sunny days, to cold, rainy ones, the number one question that I get asked from my customers is, “Do I need water and sewage back-up coverage on my insurance policy?”

I always tell these customers to imagine this.

Imagine that you wake up to 3 to 4 feet of water and sewage backed up in your basement? The water damages the furnace and all of your belongings that are stored in the basement. Your sofas, exercise equipment, television, Christmas decorations, etc…all damaged.

Furthermore, the drywall and flooring needs to be replaced, furniture is too damaged to salvage, and the cost of clean-up is expensive. Sewage and water also causes damage to utilities, such as your gas and electric. The sewage contains bacteria, viruses and other organisms that could cause illness. Even electrocution is a possibility in situations such as this. Therefore, you need to hire a professional restoration company because of these issues and dangers.

Unfortunately, most homeowner’s insurance policies do not automatically include this coverage in a policy for this type of loss. But, the good news is that water and sewer back-up & sump-pump/ejector pump failure coverage can be purchased under your homeowner’s policy and it’s reasonably priced.

As with all of our customers, we recommend that the endorsement be added to your policy even if you have an unfinished basement; water and sewer back-up & sump-pump/ejector pump failure is one of the most common homeowner’s claims.

Having a water and sewer back-up & sump-pump/ejector pump failure coverage endorsement provides coverage for the damage to the home and personal property, as well as the cost for a restoration company to clean up the damage.

Should you ever be unfortunate enough to experience a water and sewer back-up & sump-pump/ejector pump failure incident, please call Langlois Insurance Agency immediately at #815-485-6676. We can provide a recommendation for a reputable water restoration company to ensure your home is back to its former self as quickly as possible.

Please note that insurance endorsements vary by company. Please contact Langlois Insurance Agency to carefully review coverage, exclusions, limits, and costs specific to your policy.

We always love to hear from our customers!

Sincerely,

Matt Langlois

Langlois Insurance Agency

matt@langloisinsurance.com

Can my Dehumidifier Cause a Fire?

Can My Dehumidifier Cause A Fire?

Fire.

That one single word can make an insurance agent break out in a cold sweat.  In fact, one of my greatest fears is having my home, or a home of one of my insureds, break out in a raging fire.

So, when I received a Consumer Alert on a dehumidifier recall, I knew that this was content that I needed to share with all of you to help keep you, and your loved ones, safe in your home.

I don’t want to be an alarmist — fires caused by dehumidifiers are uncommon.

But, the answer to the question, “Can my dehumidifier cause a fire?” is yes. Yes, it can.

Sometimes the fire is caused by a manufacturing issue and sometimes the fire is caused by poor owner maintenance.

So, the big question is, “What are the best ways to keep your home safe.”

Step 1: Check if your dehumidifier has been recalled

If you do have a dehumidifier in your home, check to make certain that it isn’t one that has been recalled due to possible overheating, smoking, and fire hazards by visiting GreeDehumififierRecall.com

Step 2: Properly maintain your dehumidifier

Issues with dehumidifiers are not only due to manufacturing defects. In most cases, the issues that occur with dehumidifiers are due to improper maintenance. This is why you should make sure that your dehumidifier is properly maintained. Most people are not fully aware of how to maintain a dehumidifier. If you are not sure of how to take care of your dehumidifier, you should follow these tips on properly maintaining your dehumidifier.

Step 3: Please the dehumidifier in an ideal operating environment

If your dehumidifier is not in a setting that will enhance its performance, there is a chance that it will not work properly and could malfunction. So, make every effort to place your dehumidifier in an area where it will function perfectly, which will also help in extending the life of the dehumidifier.

*Set the humidistat according to the level of humidity in the air. If you set it above or below the level required, the humidifier will not work properly, particularly if you set it higher. This would place undue stress on the machine, causing it to break down.

*Another thing to watch out for is the air leaks in the room, as any leaks will put extra strain on the dehumidifier. It will be same situation as when the humidistat is turned all the way up.

*Most people place the dehumidifier right alongside a wall when they should keep it at least 6 inches away from the wall, as recommended by most manufacturers.

Should you ever be unfortunate enough to experience a dehumidifier incident, please call Langlois Insurance Agency immediately at #815-485-6676. We can provide a recommendation for a reputable restoration company to ensure your home is back to its former self as quickly as possible.

As always, please don’t hesitate to contact any of us at Langlois Insurance Agency with any questions or comments.

We always love to hear from our customers!

Sincerely, Matt Langlois
Langlois Insurance Agency

matt@langloisinsurance.com