Home buyer's insurance guide
Your Guide to Buying a Home: Key Considerations and Insurance Factors
Shopping for your dream home? There are many factors to consider when evaluating real estate, including property taxes, school districts, neighborhood appeal, and, of course, the overall cost. One often overlooked aspect is homeowners' insurance, which can significantly impact your financial investment. Use this guide to assess all the costs associated with purchasing a home.
Before You Start House Hunting: Set yourself up for financial success before beginning your search.
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Review Your Credit Score
A strong credit history can help you secure a mortgage with a competitive interest rate and may even qualify you for a discount on homeowners' insurance. Obtain copies of your credit reports, check for inaccuracies, and report any errors immediately. If your credit score needs improvement, take steps to enhance it before applying for a loan. -
Consider Renters Insurance
If you're currently renting, a renters' insurance policy can help protect your finances. In case of a disaster, it can safeguard the savings you’re accumulating for a home down payment and establish a positive insurance history when applying for homeowners coverage.
During Your Home Search, the physical characteristics of a house—its size, location, construction, and condition—affect the cost and availability of home insurance. Some appealing features may lead to higher insurance costs. Keep the following factors in mind while looking for a home:
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Fire Department Proximity
Homes near a well-rated, permanently staffed fire department typically have lower insurance premiums. Access to a nearby hydrant can further reduce costs. -
Coastal Location
Homes near the coast generally cost more to insure and often require separate hurricane or windstorm deductibles. In some areas, private insurance options may be limited, requiring coverage through a state-run program. -
Age of the Home
Older homes often have unique, ornate features but may be more expensive to insure due to the cost of replacing materials and outdated plumbing or electrical systems. Consider the cost of necessary upgrades before purchasing. -
Roof Condition
A well-maintained roof can enhance safety and reduce insurance costs. Homes with fire- or hail-resistant roofing materials may qualify for discounts.
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Construction Quality
Homes built to meet modern building codes or constructed by skilled professionals are more likely to withstand natural disasters, leading to potentially lower insurance costs. -
Flood Risk
Standard homeowners' insurance does not cover flood damage. If the property is in a flood-prone area, you’ll need separate flood insurance, which is available through the National Flood Insurance Program (NFIP) and select private insurers. -
Earthquake History
While earthquakes are commonly associated with California, they can occur in many states. Standard policies do not cover earthquake damage, but earthquake insurance can be purchased separately. -
Pools and Special Features
If the home has a swimming pool, hot tub, or other special features, additional liability insurance may be necessary. An umbrella liability policy can provide extra protection if an accident occurs on your property.
Before making an Offer, take precautionary steps to evaluate the home’s history, condition, potential issues, and costs.
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Check the Loss History Report
Ask the current homeowner for a loss history report, such as a Comprehensive Loss Underwriting Exchange (C.L.U.E.) report from LexisNexis or an A-PLUSTM property report from ISO®. These reports reveal past claims, including water damage or storm-related repairs, which can influence insurance costs and the home's condition. -
Schedule a Home Inspection
A professional inspection is essential before finalizing a mortgage. Accompany the inspector to ensure a thorough evaluation, including:
- Overall home condition
- Signs of water damage, termites, or infestations
- Electrical, plumbing, and septic system reviews
- Structural issues or needed repairs
- Compliance with modern safety standards
- Identification of underground oil storage tanks, which can impact insurance eligibility
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