When buying a house what insurance do i need?

Most lenders will require you to have homeowners insurance, also commonly known as hazard insurance, and often abbreviated as HOI. This insurance policy covers losses occurring to your home, its contents, loss of its use (additional living expenses) or loss of other personal possessions of the homeowner.

You don't even have to own your home to need insurance; many landlords require their tenants to maintain renter's insurance coverage. But whether it's required or not, it's smart to have this kind of protection. We'll walk you through the basics of homeowners insurance policies.

Although they are infinitely customizable, a homeowner's insurance policy has certain standard elements that provide what costs the insurer will cover.

In the event of damage due to fire, hurricanes, lightning, vandalism or other covered disasters, your insurer will compensate you so your house can be repaired or even completely rebuilt. Destruction or mutilation from floods, earthquakes, and poor home maintenance is generally not covered and you may require separate riders if you want that type of protection. Freestanding garages, sheds or other structures on the property may also need to be covered separately using the same guidelines as for the main house.

Clothing, furniture, appliances, and most of the other contents of your home are covered if they're destroyed in an insured disaster. You can even get "off-premises" coverage, so you could file a claim for lost jewelry, say, no matter where in the world you lost it. There may be a limit on the amount your insurer will reimburse you, however. According to the Insurance Information Institute, most insurance companies will provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home. For example, if your house is insured for $200,000, there would be up to about $140,000 worth of coverage for your possessions.

If you own a lot of high-priced possessions (fine art or antiques, fine jewelry, designer clothes), you might want to pay extra to put them on an itemized schedule, purchase a rider to cover them, or even buy a separate policy.

Liability coverage protects you from lawsuits filed by others. This clause even includes your pets! So, if your dog bites your neighbor, Doris, no matter if the bite occurs at your place or hers, your insurer will pay her medical expenses. Or, if your kid breaks her Ming vase, you can file a claim to reimburse her. And if Doris slips on the broken vase pieces and successfully sues for pain and suffering or lost wages, you'll be covered for that, too, just as if someone had been injured on your property.

While policies can offer as little as $100,000 of coverage, experts recommend having at least $300,000 worth of coverage, according to the Insurance Information Institute. For extra protection, a few hundred dollars more in premiums can buy you an extra $1 million or more through an umbrella policy.

It's unlikely, but if you do find yourself forced out of your home for a time, it will undoubtedly be the best coverage you ever purchased. This part of insurance coverage, known as additional living expenses, would reimburse you for the rent, hotel room, restaurant meals, and other incidental costs you incur while waiting for your home to become habitable again. Before you book a suite at the Ritz-Carlton and order caviar from room service, however, keep in mind that policies impose strict daily and total limits. Of course, you can expand those daily limits if you're willing to pay more in coverage.

All insurance is definitely not created equal. The least costly homeowners insurance will likely give you the least amount of coverage, and vice versa.

In the U.S. there are several forms of homeowners insurance that have become standardized in the industry; they are designated HO-1 through HO-8 and offer various levels of protection depending on the needs of the homeowner and the type of residence being covered.

There are essentially three levels of coverage.

Actual cash value covers the cost of the house plus the value of your belongings after deducting depreciation (i.e., how much the items are currently worth, not how much you paid for them).

Replacement value policies cover the actual cash value of your home and possessions without the deduction for depreciation, so you would be able to repair or rebuild your home up to the original value.

The most comprehensive, this inflation-buffer policy pays for whatever it costs to repair or rebuild your home—even if it's more than your policy limit. Certain insurers offer an extended replacement, meaning it offers more coverage than you purchased, but there is a ceiling; typically, it is 20% to 25% higher than the limit.

Some advisors feel all homeowners should buy guaranteed replacement value policies because you don't need just enough insurance to cover the value of your home, you need enough insurance to rebuild your home, preferably at current prices (which probably will have risen since you purchased or built). “Often shoppers make the mistake of insuring [a house just] enough to cover the mortgage, but that usually equates to 90% of your home's value," says Adam Johnson, a home insurance product manager for policy comparison site QuoteWizard.com. "Due to a fluctuating market, it's always a good idea to get coverage for more than your home is worth." Guaranteed replacement value policies will absorb the increased replacement costs and provide the homeowner with a cushion if construction prices increase.

While homeowner's insurance covers most scenarios where a loss could occur, some events are typically excluded from policies, such as natural disasters or other "acts of God," and acts of war.

What if you live in a flood or hurricane area? Or an area with a history of earthquakes? You'll want riders for these or an extra policy for earthquake insurance or flood insurance. There’s also sewer and drain backup coverage you can add on, and even identity recovery coverage that reimburses you for expenses related to being a victim of identity theft.

So what's the driving force behind rates? According to Noah J. Bank, a vice president and insurance advisor at HUB International, it's the likelihood a homeowner will file a claim—the insurer's perceived "risk." And to determine risk, home insurance companies give significant consideration to past home insurance claims submitted by the homeowner as well as claims related to that property and the homeowner’s credit. “Claim frequency and severity of the claim play a considerable role in determining rates, especially if there's more than one claim relating to the same issue like water damage, wind storms, etc.,” Bank says.

While insurers are there to pay claims, they're also in it to make money. Insuring a home that has had multiple claims in the past three to seven years, even if a previous owner filed the claim, can bump your home insurance premium into a higher pricing tier. You may not even be eligible for home insurance based on the number of recent past claims filed, notes Bank.

The neighborhood, crime rate, and building material availability will all play a part in determining rates, too. And of course, coverage options such as deductibles or added riders for art, wine, jewelry, etc.—and the coverage amount desired—also factor into the size of an annual premium.

“Pricing and eligibility for home insurance can also vary depending on an insurer’s appetite for certain building construction, roof type, condition or age of the home, heating type (if an oil tank is on-premise or underground), the proximity to the coast, swimming pool, trampoline, security systems, and more,” says Bank.

What else affects your rates? “The condition of your home could also reduce a home insurance company’s interest in providing coverage,” says Bill Van Jura, an insurance planning consultant in Poughkeepsie, N.Y. “A home that’s not well-maintained increases the odds the insurer will pay on a claim for damage.” Even the presence of a pup residing at your home can raise your home insurance rates. Some dogs can do a lot of damage, depending on the breed.

While it never pays to play it cheap with coverage, there are ways to cut down on insurance premiums.

A burglar alarm monitored by a central station or tied directly to a local police station will help lower the homeowner's annual premiums, perhaps by 5% or more. In order to obtain the discount, the homeowner must typically provide proof of central monitoring in the form of a bill or a contract to the insurance company.

Smoke alarms are another biggie. While standard in most modern houses, installing them in older homes can save the homeowner 10% or more in annual premiums. CO detectors, dead-bolt locks, sprinkler systems and in some cases even weatherproofing can also help.

Like health insurance or car insurance, the higher the deductible the homeowner chooses, the lower the annual premiums. However, the problem with selecting a high deductible is that claims/problems that typically cost only a few hundred dollars to fix—such as broken windows or damaged sheetrock from a leaky pipe—will most likely be absorbed by the homeowner. And these can add up.

Many insurance companies give a discount of 10% or more to customers who maintain other insurance contracts under the same roof (such as auto or health insurance). Consider obtaining a quote for other types of insurance from the same company that provides your homeowners insurance. You may end up saving on two premiums.

If you plan to build an addition or adjacent structure to your home, consider the materials that will be used. Typically, wood-framed structures will cost more to insure because they are highly flammable. Conversely, cement- or steel-framed structures will cost less because these are less likely to succumb to fire or adverse weather conditions.

Another thing most homeowners should, but often don't, consider are the insurance costs associated with building a swimming pool. In fact, items such as pools and/or other potentially injurious devices (like trampolines) can drive the annual insurance costs up by 10% or more.

Obviously this is easier said than done, but homeowners who own their residences outright will most likely see their premiums drop. Why? The insurance company figures if a place is 100% yours, you'll take better care of it.

No matter what initial price you're quoted, you'll want to do a little comparison shopping, including checking for group coverage options through credit or trade unions, employers, or association memberships. And even after purchasing a policy, investors should, at least once per year, compare the costs of other insurance policies to their own. In addition, they should review their existing policy and make note of any changes that might have occurred that could lower their premiums.

For example, perhaps you have disassembled the trampoline, paid off the mortgage, or installed a sophisticated sprinkler system. If this is the case, simply notifying the insurance company of the change(s) and providing proof in the form of pictures and/or receipts could significantly lower insurance premiums. “Some companies have credits for complete upgrades to plumbing, electric, heat, and roof,” says Van Jura.

To know if you have enough coverage to replace your possessions, make periodic assessments of your most valuable items, too. According to John Bodrozic, co-founder of HomeZada. a home maintenance app, “Many consumers are under-insured with the contents portion of their policy because they have not done a home inventory and added the total value to compare with what the policy is covering.”

Look for changes in the neighborhood that could reduce rates, as well. For example, the installation of a fire hydrant within 100 feet of the home, or the erection of a fire substation within close proximity to the property, may lower premiums.

When looking for an insurance carrier, here's a checklist of search and shopping tips.

When it comes to insurance, you want to make sure you are going with a provider that is legitimate and creditworthy. Your first step should be to visit your state’s Department of Insurance website to learn the rating for each home insurance company licensed to conduct business in your state, as well as any consumer complaints lodged against the insurance company. The site should also provide a typical average cost of home insurance in different counties and cities.

Investigate home insurance companies you’re considering via their scores on the websites of the top credit agencies (such as A.M. Best, Moody's, J.D. Power, Standard & Poor's) and those of the National Association of Insurance Commissioners and Weiss Research. These sites track consumer complaints against the companies as well as general customer feedback, the processing of claims, and other data. In some instances, these websites also rate a home insurance company's financial health to determine whether the company is able to pay out claims.

Following a large loss, the burden of paying out-of-pocket to repair your home and waiting for reimbursement from your insurer could place your family in a difficult financial position. A number of insurers are outsourcing core functions, including the handling of claims.

Before purchasing a policy, find out whether licensed adjusters or third-party call centers will be receiving and handling your claims calls. “Your agent should be able to provide feedback on his or her experience with a carrier, as well as its market reputation,” says Mark Galante, president of field operations for the PURE Group of Insurance Companies. “Look for a carrier with a proven track record of fair, timely settlements and make sure to understand your insurer’s stance on holdback provisions, which is when an insurance company holds back a portion of their payment until a homeowner can prove that they started repairs.”

Every company will say it has good claims service. However, cut through the clutter by asking your agent or a company representative the insurer’s retention rate—that is, what percentage of policyholders renew each year. Many companies report retention rates between 80% and 90%. You can also find satisfaction information in annual reports, online reviews and good old-fashioned testimonials from people you trust.

“Obtaining multiple quotes is important when looking for any type of insurance; however, it is especially important for homeowner's insurance since coverage needs can vary so much," says Eric Stauffer, former president of ExpertInsuranceReviews.com. "Comparing several companies will yield the best overall results."

How many quotes should you get? Five or so will give you a good sense of what people are offering and leverage in negotiations. But before collecting quotes from other companies, request a price from insurers you already have a relationship with. As previously mentioned, in many instances, a carrier you’re already doing business with (for your auto, boat, etc.) may offer better rates because you're an existing customer.

Some companies provide a special discount for seniors or for people who work from home. The rationale is both these groups tend to be on-premises more often—leaving the house less prone to burglary.

The annual premium is often what drives the choice to purchase a home insurance policy, but don't look solely at price. “No two insurers use the same policy forms and endorsements, and policy wording can be very different,” says Bank. “Even when you think you're comparing apples to apples, there's usually more to it, so you need to compare coverages and limits.”

Once you’ve signed a contract to purchase your dream home, the next step you should be taking is to start shopping around for a good home insurance policy.

Oftentimes you’ll have about a month before you sign the contract and you close on the house, so this gives you enough time to find a policy that works for you, since it’s up to the buyer to have the house insured between the exchange and completion of the deal.

However, in the event that you are using a mortgage lender, you’ll want to make sure that the policy you’re looking to purchase meets the requirements of the lender. Having a good personal property insurance policy is important for protection in the event that something should happen to your new property.

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Having homeowners insurance provides you with coverage to replace or repair your home as well as the property within your home. This affords you and your family peace of mind with the knowledge that whatever happens, you won’t have to pay out of pocket for any damages or replacement costs your property may have suffered.

Home insurance policies can also cover the costs of any legal fees associated with injuries or lawsuits that may be brought against you from any injuries caused by you, your family members or pets, regardless of whether or not you’re at fault.

Additionally, a good property insurance policy can protect you from having to pay any medical costs associated with these potential lawsuits.

Homeowners insurance won’t cover a number of things, such as:

Related: What is and isn’t covered by homeowner’s insurance

Q: How long does it take to get a homeowners insurance policy in place? A: When to get home insurance is an important and often overlooked aspect of purchasing a new home. The good news is that insurance companies like APOLLO can get a quote emailed to you within 5 minutes, and your house can be insured within hours after that. However, some companies and lenders will require you to get a home inspection before the home is insured.

Q: Can I get homeowners insurance before closing? A: Yes, the buyer should have homeowners insurance before closing on the property. In fact, some lenders will require you to have the policy in place in the days leading up to the closure of the property.

Q: How much does homeowners insurance cost? A: Home insurance costs can differ greatly, as they’re dependent on numerous different factors. These factors include things like the location, age, and state of repair of the property. As there can be great difference in costs, it’s important to get quotes to ensure you get the best price possible.

Q: Is homeowners insurance required to purchase a home? A: While homeowners insurance isn’t a legal requirement to purchase a home, lenders will require proof of insurance before they will fund your loan. However, even if you’re paying the full purchase price of the home in cash, it’s still a good idea to insure your home, as it can save you from having to pay out of pocket for any damages or lawsuits that may occur, even if it’s no fault of your own.

Q: Am I required to have homeowners insurance once my mortgage is paid off? A: Once you’ve completed your mortgage payments, your mortgage lender will not require you to continue paying for homeowners insurance. However, it’s still a good idea to have a homeowners insurance policy in place even once you’ve paid off your mortgage, since it can end up protecting you from paying potentially crippling fees yourself.

When it comes to home insurance, companies will offer different liability coverage depending on the individual company and your particular case. Remember to always check with your company to understand what your individual policy does and does not include.

Find out how much a tailored homeowners insurance plan will cost for you with a free quote from APOLLO emailed directly to your inbox in under five minutes. Our insurance advisors are ready to answer your questions over web chat or phone.

We can help you understand the benefits of Home Insurance, and get your belongings covered in minutes.

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Buying a new house is exciting, whether you’re a first-time buyer or an experienced homeowner. Going through open houses or viewing homes for sale with a real estate agent offers the chance to see what features you do and do not want in your new home. While finding your perfect new home and starting the buying process is thrilling, it can also be stressful. Worrying about price negotiations, home inspection and mortgage terms can dampen the excitement of buying a house.

Often overlooked in the long list of things to do before buying and moving into your new home is buying homeowners insurance. Getting homeowners insurance before closing is an important step in the homebuying process and should be a priority.

In most cases, lenders mandate buying homeowners insurance before the loan closes and maintaining coverage for the life of the loan. By securing the coverage you need before you even move into your new home, you safeguard your purchase from disaster for yourself and the lender. It’s important to research various insurance policy options as they may offer different levels of coverage. And different homes may have different coverage needs. For instance, if your home is in or near a flood plain, you may be required to add flood insurance coverage to your policy. Even if the lender doesn’t require buying homeowners insurance with flood coverage, you might consider it. Some homes are located where earthquake insurance would be a wise investment, while others have no need. So take care to evaluate the best insurance coverage for your specific needs.

Sometimes you learn essential information about the property when buying homeowners insurance. That’s why many experienced home buyers get a home insurance quote before buying the house or even before deciding on any specific property.

Once you’ve found the policy that’s best for you, check that it meets the requirements of your lender. Most financial institutions won’t fund a mortgage, or home equity lines of credit, without establishing homeowners insurance before closing. In fact, some lenders may require that you purchase extra coverage in addition to a basic homeowners policy.

After determining that your desired policy meets your lender’s requirements and your specific needs, you can purchase the insurance. This should be done sometime before you to officially close on your home. The insurance company will normally pre-approve the policy and then wait for your escrow/title company to send a request for Proof of Insurance when the final closing date is near. The insurance company will then email or fax the confirmation of coverage before the closing date.

Buying homeowners insurance protects your new home in case of disasters such as a burst pipe or fire. This safety net offers a clear advantage for the homeowner should an accident occur. Rather than paying out of pocket for expensive repairs, the insurance covers the cost of repairs, minus the deductible. Homeowners can relax knowing their home is protected, and they can continue enjoying their investment.

Buying homeowners insurance also protects your lender. Having invested their money to facilitate your purchase, your lender wants to know that their investment is safeguarded. That’s why buying homeowners insurance is usually made simple with an escrow account. This account is set up by your lender to hold funds for certain property expenses. Some of your monthly mortgage payment is put into your escrow account by your lender. They can then pay your insurance costs and/or property taxes using the money in the account. Paying the premium on your behalf protects the lender by allowing them to verify that your home is covered. The escrow account also makes your life as a homeowner less stressful, as you pay one monthly payment to the lender rather than paying several different monthly, yearly or quarterly payments to various outlets.

Buying homeowners insurance before closing is a smart and necessary move that protects the big investment of a new house. In addition to covering repairs to your home, many policies offer some coverage for you and your family’s belongings. Basic homeowners policies usually include liability coverage to protect you against legal action if someone is hurt on your property. These lesser-known benefits of homeowners insurance increase the value of purchasing a policy.

The amount of coverage your lender requires for your new home may not be clear. Each lender may differ in their requirements regarding buying homeowners insurance, so it’s important to understand exactly what coverage is needed. Additionally, there may be extra coverage options that are not required but are included in your homeowners insurance policy or offered optionally. If you have any questions about what’s covered in your policy, speak with a helpful Wawanesa homeowners insurance agent by calling 800-640-2920. Your agent can help you determine if you have enough coverage to meet the lender’s requirements.

When buying homeowner insurance, it’s critical to understand the protection you will receive. Most basic policies provide the following coverage:

Dwelling coverage details the part of your policy devoted to covering the costs to rebuild or repair the structure of your home. It also covers installed features and appliances permanently attached to the structure.

Structural coverage covers all other structures on your property other than the dwelling place — your home. For instance, this section covers a detached garage, guests quarters, or fence.

This portion of your homeowners insurance covers the cost of repairing or replacing your belongings damaged due to a covered loss, such as a fire or theft. If you have a considerable amount of expensive jewelry, artwork, or furniture; it’s wise to investigate enhanced personal property coverage when buying homeowners insurance.

If your home is badly damaged due to a covered loss, this portion of your insurance policy will pay some of your living expenses should you be forced out of your home. For example, if you need to stay in a hotel while your home is repaired, that will fall under loss of use coverage.

When buying homeowner insurance, you are also securing protection against getting sued for accidents that occur on your property. This coverage can pay for property damage or bodily injury when someone visits your home. This would include visitors and repair technicians, for example.

Buying homeowners insurance is never one-size-fits-all. While the policy may have standard coverage and deductibles, it can also be customized to meet your specific needs through riders. You can boost your coverage limits or add new forms of coverage through riders. Examples include increased personal property coverage, flood, or earthquake.

If your new home is in a subdivision or planned community, you are likely required to pay a homeowners association fee. Also known as HOA fees, this money helps cover the upkeep and maintenance costs of the community where your home is located. Often included in HOA fees are your home’s portion of an insurance policy that covers the common areas for the community and/or complex.

As a community member, this HOA policy is partly your responsibility, but it does not cover the structure of your home, your personal property, or the belongings inside of it. HOA insurance does nothing to protect your new house from damage or disaster. Buying homeowners insurance is essential for protecting your home. A homeowners policy covers the physical structure of your home and your personal property within your property lines.

The insurance policy purchased by the Condominium Association offers coverage for the common areas and, in most cases, the basic structure of a condominium or townhouse complex. It is best to check your Association’s master insurance policy to confirm what portions of the structure are covered. Swimming pools, tennis courts and playgrounds for the neighborhood families to enjoy are usually covered in this policy. As a part-owner of these amenities, it is partly your responsibility to pay for accidents or liabilities that may occur in community areas. A portion of your HOA fees are used to cover this insurance policy.

It is critical to understand your potential exposure as a member of the Condominium Association. For instance, should a child sustain an injury on the community playground and the parents decide to sue the Association, you may be liable for a portion of the costs. Any loss costs in excess of the Association’s coverage limits are passed on to you as a part-owner of the community. You may be able to add additional HOA coverage to your condominium insurance policy. This could protect you in the event the Association’s insurance is insufficient to cover the community expenses related to a covered loss.

There are some limitations to basic homeowners insurance policies. Depending on your home’s geographical area, you may need to purchase additional coverage for disasters such as floods or earthquakes.

Most homeowners insurance policies cover accidental flooding from a burst pipe or other water leak in your home, but they usually do not cover flooding caused by a natural disaster. Homes that are built on a floodplain or are in commonly-flooded areas benefit from supplemental flood insurance. Your lender may even require buying homeowners insurance with additional flooding coverage if you live in a floodplain.

Fortunately, most homeowner’s insurance policies cover damage due to wildfires. and other bushes around your neighborhood may be gone.

Buying homeowners insurance with supplemental earthquake coverage is another consideration not included in basic policies. An earthquake can create major issues for the structure of a home or destroy the structure completely. Homeowners living in areas prone to earthquakes, such as along a fault line, should invest time into checking that their home has modern earthquake protections built in. For owners of older homes, it is especially important to double check if their home has been retrofitted to comply with modern building standards in earthquake protection. Even with structural protections in place, a major earthquake can make a home unlivable. Relatively minor earthquakes can still do extensive cosmetic damage. Earthquake insurance, in addition to a basic homeowners policy, can help you repair or rebuild if your home is damaged or destroyed in an earthquake.