Homeowners Insurance: What Buyers Need to Know

You’ve found your house.

Your offer is accepted.

You’re working through the mortgage.

And then someone asks:

“Do you have homeowners insurance?”

If you’re buying a home, insurance isn’t something you want to think about at the last minute.

What Is Homeowners Insurance?

Homeowners insurance is designed to provide financial protection against certain covered losses involving your home and property.

Depending on the policy, coverage may include things such as:

• The dwelling
• Other structures
• Personal belongings
• Certain liability risks
• Additional living expenses in certain circumstances

But here’s the important part:

Not everything is covered.

Insurance policies have exclusions, limits, deductibles and conditions.

That’s why you need to understand the policy you’re purchasing.

Your Lender Will Usually Require It

If you’re financing your home, your lender will generally require homeowners insurance.

The lender wants to know that the property has appropriate coverage.

Your insurance agent and lender can tell you what documentation is required.

Start Shopping Early

Don’t wait until the day before closing.

You’ll want time to:

• Get quotes
• Compare coverage
• Ask questions
• Choose an insurance company
• Provide the necessary information
• Get proof of insurance to your lender

And sometimes getting insurance isn’t as simple as choosing the cheapest quote.

The Cheapest Policy Isn’t Necessarily the Best Fit

Look beyond the premium.

Ask:

What does this policy actually cover?

What are the deductibles?

What are the coverage limits?

What exclusions apply?

What happens if I have a claim?

Is replacement-cost coverage included where appropriate?

Are there special limitations I need to know about?

Your insurance professional can explain the specifics.

What About Flood Insurance?

This is an important distinction.

A standard homeowners policy may not cover flood damage.

Depending on the property’s location and circumstances, separate flood insurance may be appropriate or required.

Ask your insurance professional.

Don’t assume “homeowners insurance” means you’re covered for everything.

What About Older Homes?

If you’re buying an older property, an insurance company may ask questions about the age and condition of certain systems.

That could include things such as:

• Roof
• Electrical
• Plumbing
• Heating
• Other major components

Ask early.

You don’t want to discover an insurance issue right before closing.

What About the Deductible?

Your deductible is the amount you may be responsible for paying before your insurance coverage applies to a covered loss, subject to the policy terms.

A lower premium may come with a higher deductible.

Make sure you understand the tradeoff.

Don’t Forget Your Belongings

The home itself isn’t the only thing you own.

You’ll also have furniture, clothing, electronics and other personal property.

Ask your insurance professional how personal property is covered and whether certain high-value items require additional coverage.

What About Liability?

Homeowners insurance can also provide certain liability coverage.

For example, if someone is injured on your property, the policy may provide coverage subject to its terms and limits.

Again, your insurance professional is the person to explain your specific policy.

Ask About Discounts

Your insurance professional can tell you whether you qualify for discounts.

Things like security systems, multiple policies or other factors may affect your premium.

Don’t assume.

Ask.

Your Insurance Agent Is Part of Your Buying Team

Your real estate broker doesn’t choose your insurance policy.

Your lender has requirements.

Your insurance professional helps you determine appropriate coverage.

Those are different roles.

And that’s okay.

You don’t need one person to know everything.

You need the right professional for each part of the transaction.

Before Closing

Make sure you know:

☐ Which insurance company you’re using

☐ What your policy covers

☐ Your deductible

☐ Your coverage limits

☐ Any important exclusions

☐ Whether flood insurance is needed

☐ Whether your lender has received the required documentation

☐ What your first premium/payment will be

The Bottom Line

Don’t treat homeowners insurance as another piece of paperwork you need to check off.

You’re protecting a very large investment.

Take the time to understand what you’re buying.

And don’t wait until closing week to start.

Note: Insurance coverage varies by policy, insurer and property. This page is educational and is not insurance advice. Speak with a licensed insurance professional about your specific coverage needs.

Have a Question?

Buying a home comes with a lot of questions. You don’t have to figure everything out on your own.

Have a question about something you read here? Want to talk through your situation? Or just not sure what your next step should be?

I’m happy to help.

Schedule a Time to Talk With Karyn

No pressure. No obligation. Just straight answers.

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