If you’re shopping for a home, you might be looking for something with three bedrooms, two bathrooms, an updated kitchen, and a big backyard for the kids and the dog. Add one more thing to that list: good homeowners insurance.
That’s because when you’re in escrow, your mortgage lender will require you to buy a policy before the sale is final.
Since your new home is likely to become your most valuable asset, it’s important to understand the types of coverage that are available so you can decide the kind and amount of insurance that is right for you. It’s also helpful to be aware of insurability issues.
Coverage to consider
A standard homeowners policy covers the dwelling, additional structures, personal property, and loss of use should your home become uninhabitable due to a covered loss. It also provides you with some liability coverage if someone gets hurt on your property. Be sure to ask your insurance agent about the various types of homeowners policies available, along with the different coverage and premiums associated with them. When the need arises, you don’t want to be surprised that the coverage you have is not what you expected.
Also, know that most insurance policies may not cover losses from certain natural disasters, but government agencies or specialized insurance companies offer plans that are worth considering—and might even be required, if your home is in a designated high-risk flood zone, for example.
Many insurers offer a multipolicy discount, so it may be a good idea to have both your auto and home insurance policies with the same company.
Insurance companies will look at “acceptability criteria” when they decide whether or not to insure a home. The criteria include things such as the type of construction (e.g., wood or masonry), the type of roof (e.g., composite shingle or tile), and the use of the dwelling (owner-occupied or rented out).
While the acceptability criteria vary by insurer, many carriers consider certain common factors. First, insurers usually look at the prior claims history of the applicant and the home he or she is seeking to insure. Second, they may consider any characteristic of the home or property that could create a liability issue. That might be a broken handrail, uneven pavement, or a swimming pool without a safety fence.
Depending on the age of a house or its prior loss history, an insurance company may require a home inspection before the buyer can obtain a homeowners policy. If an inspection is required, the inspector may also look for evidence of prior damage—for instance, a stain on the ceiling indicating that the roof is leaking or any wall or floor damage pointing to water seepage or leaks.
With all the headaches of buying a new home, good homeowners insurance can bring peace of mind to the process.
Photo (top): Dave Ricks