It is perfectly reasonable to think that your insurance policy would transfer when you purchase a new property. Many people do. Unfortunately this just isn’t the case. This is due to the way the policy is created. Your insurance policy is a contract between you and the insurance company. There are several factors that go into this contract. Let’s look at homeowner’s insurance specifically.
Your homeowner’s insurance policy begins with your physical address. All coverage limits, conditions and definitions in the policy that follows need to be read with the insured location in mind. The insured location is the address specifically listed on the declarations page.
Your Coverage Limits
There are many additional coverages available that an insured can choose to add or remove. You can make changes to these additional coverages at any time during their policy period. This might lead to some of the consumer confusion about why you can’t change the insured address at any time as well. The difference is that these additional coverages are available for your insured location but coverage for them is not determined by your location.
Determining Homeowners Coverage
The primary coverages that make up a homeowners insurance policy are Coverages A, B, C, D , E & F. They are listed at the top of your declarations pages. The limits for Coverages A, B, C & D are set based on the unique construction features of your address. Construction features include:
- exterior siding
- year built
- square footage
This list only includes a few of the construction features used. If insurance companies allowed for a simple change of an insured address, then the policy would not factor in the construction and coverage needed on your new home. This would leave you susceptible to a gap in coverage or possibly even overpaying for your insurance.
Your rates are made up of many different criteria and are personal to you and your location. For instance, living in the city versus a town could mean a different rate. Vinyl siding and brick siding have different replacement costs associated and therefore require different coverage limits. A newer roof on your home might result in a discount as it is more likely to stand up to strong wind and hail and last longer.
Insurance is designed to put you back where you were in the event of a catastrophic loss. Due to this your rates are made up in part by cost of materials, size of home, construction materials, and location among many more factors such as your personal credit history and loss history. It is impossible to compare property A to property B because they will each have something slightly different that makes them unique.
If insurance could transfer to a new location, then that would be pretty great. But the fact that it doesn’t transfer doesn’t mean it has to be a difficult process to insure your new home purchase. Give us a call if you are in the process of purchasing a new home. We will look at our options to find you the best value and coverage to properly protect you and your new home!