Finding a home to buy may seem like the hardest part of the home-buying experience. But seasoned homebuyers will tell you that it’s only after you find a home to buy that the real work begins. Between the time you negotiate the purchase contract and the time you close the sale, you must line up financing, inspect the property, check out title to the property, figure out how to hold title, find a mover and arrange for homeowner’s insurance. And this is only a partial pre-closing to-do list. Combine this with the typical homebuyer’s day-to-day chores—like working to pay for the new home—and it’s no wonder that arranging for homeowner’s insurance is often left until the last minute.
Homeowner’s insurance insures the dwelling in case of a catastrophic loss. If you are using a mortgage to help buy a home, the lender will require that you carry homeowner’s insurance naming the lender as loss payee. The insurance policy will need to be in effect at closing. You may be required to pay a full year’s premium in advance at closing. Even if you’re paying all cash and won’t need a mortgage, you’ll want homeowner’s insurance to protect your equity.

First-time tip: You may have no trouble finding an insurer for your new home, but don’t assume that this will be the case. Recently homebuyers bought a home in Piedmont, Calif. They already owned a home in Piedmont so they called their broker to arrange insurance for the new home. Their current insurance carrier refused to cover the new home because it had a wood shingle roof. Another insurance carrier agreed to cover the property, but they wanted an appraisal of the property and a copy of the buyer’s home inspection report as a condition of insuring. They also required that some of the defects identified in the inspection report be completed within a certain time period after closing. The buyers finally found insurance with another carrier, but it took about a week to sort all this out. To be on the safe side, start shopping for insurance as soon as you know you’re buying the home.
Make sure that you have enough insurance coverage to fully rebuild the home in the case of a catastrophic loss. The cost to rebuild varies from one location to the next. It can also vary from house to house. A quality-built home with many upgrades and custom features will cost much more to rebuild than a medium-quality home with no upgrades. Ask your real estate agent or a local contractor for a price-per-square foot figure to rebuild the home you’re buying. Multiply this by the square footage for the home to arrive at an approximate cost to rebuild. You can find out the square footage of a home by looking at the appraisal report that was done for your mortgage lender.

Homeowner’s insurance policies have limitations on coverage. For instance, most policies don’t cover loss from earthquakes. You may want to add riders to the standard policy, if you can, to cover exclusions. Or, you may want to get a separate insurance policy such as an earthquake insurance policy.

Homeowner’s insurance policies usually include a package of items such as personal property and liability coverage. If you find this coverage to be inadequate, consider raising the limits.

Premium costs vary depending on the amount of the deductible. One way to lower the amount of your insurance premium is to increase the amount of the deductible, say from $500 to $2,000. Another way is to shop both your home and auto policys together. Most providers offer discounts if they provide both.

There are also some newer products that offer nice savings for those buying New Construction.

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