Insurance Time-Lines

We often get the question from both Realtors and homebuyers alike, "When should we arrange for insurance?" The advice we give is loud, clear and consistent ... DO IT EARLY !

For a whole host of reasons, homebuyers should start the process of securing homeowner insurance immediately after signing a contract, and most of the important details of the policy should be firmed up within 15 days of that.

Reasons for moving quickly to secure insurance include:

• Lower Rates - With the luxury of a few days to a week, an insurance agent (particularly an independent agent) has the time to shop among several different insurance companies to obtain the best possible pricing.

• Firm Rates - Rather than shooting from the hip, and giving a "ballpark figure", your agent will be able to provide pricing that is quite accurate. You may be counting on these numbers not to change as you begin putting together your monthly expenses and start budgeting for principal, interest, taxes and the like.

• Inspections - With enough lead-time, you can arrange to have a proper home inspection done, as well as an inspection by your insurance agent or carrier. These inspections can bring to light issues or concerns you'll want to know early on in the process, and can have a big impact on insurance costs. It's a terrible feeling when just before settlement the insurance company sends out a laundry list of things that MUST be corrected, or else they'll cancel the policy.

• Other Surprises - Surprises are great on holidays and birthdays, but not on the day of a settlement. Almost all insurance companies are going to look at a C.L.U.E.® Report on the property to see if there have been any claims at that particular location over the past several years. This report can be an early warning that there may be problems with the property.

  The insurance company is also going to run a "Credit Score", like a credit report card, on the buyer. Either one of these reports can impact the price of homeowners insurance or whether a particular company will write the coverage at all. You'll want to know these things well in advance of settlement so you can prepare and plan on how to deal with them.

• Pre-Settlement Possession - If you're moving in ahead of settlement, you'll want to provide the insurance company or agent an extra cushion of time to properly prepare your insurance policy. Properly covering a pre-settlement possession can be tricky, and you want to be sure you're getting the right protection, effective on the right date.

• Nothing to Lose - You really have nothing to lose by arranging and even paying for your insurance well in advance of settlement. If something goes wrong, settlement is postponed or deal falls through, you get a full refund of your premium.

Now, I'll be the first to agree there are situations when you just don't have the time to do these things in advance. More than once we've received a call from a settlement table saying "get over here right away, and bring a policy with you!" Sure, there are times when we've delivered a policy within 15 minutes and are asked to bind coverage on a property "sight unseen". But there is no doubt that brings with it a whole bunch of unanswered questions and a boat-load of potential for pricing changes and underwriting problems.

When you have the luxury of time, there is no substitute for early planning and preparation. Call your insurance agent as soon as you sign those papers and get the wheels in motion. You'll be glad you did when the settlement process goes smoothly without a hitch, and your budget figures are right on the money.