The Home Buyer’s Guide to Insurance

As the home buying surge continues nationwide, we want to help clients better understand how insurance fits into today’s purchasing process. Issues like climate change and aging infrastructure have transformed the homeowner’s insurance market, making it harder to obtain a policy and more expensive to keep one in place. As such, it behooves potential owners to consider insurance options before committing to a home, no matter how great the architecture or location.

By incorporating these five simple steps into your real estate purchase, you will make a more informed decision while house hunting and better protect your dream home once you have the keys.

1. Talk to your insurance broker before you sign the contract. 
Securing a homeowner’s policy is harder in today’s challenging market, especially if you are buying in a region prone to severe weather events. Before you submit a bid, contact your broker to get a location check so that they can let you know if either the specific address or general area is prone to insurance-impacting issues. Along with climate concerns and any claims history, carriers are looking at the type of home. For example, historic ones (infamous for costly rebuilds) and condominiums (known for leaks) can be less desirable than newer builds with up-to-date codes.

You’ll have the results of your location check within a week, along with approximate premiums if coverage is possible. And if carriers have concerns about the property, you will find out what obstacles stand in your way, such as roads in fire hazard zones that are too difficult for fire trucks to access or a high likelihood of flooding. While this call is important for every buyer, it’s especially crucial for those buying a house sight unseen, as it’s another check against pitfalls down the road.

Bonus tip 1: Before you make an all-cash offer or opt to forgo the mortgage clause in the contract, consider this: Banks won’t lend money to anyone without insurance (unless the buyer has permission to self-insure), and that clause provides some protection if you cannot otherwise obtain a policy. Once you sign a contract without a mortgage clause, you will have to go through with the sale regardless or forfeit your down payment even if you can’t get a policy. Therefore, an early call to your broker could help prevent such a dilemma.

2. Negotiate with insurance premiums in mind.
What you learn from that location check can be used as leverage in your ongoing purchasing negotiations. In an area where insurance is hard to obtain, a seller might be willing to pay for any prerequisites to coverage—a backup generator or hurricane shutters, perhaps even fire-resistant landscaping—or reduce the asking price to compensate for the work you will have to do yourself. Either way, you can avoid incurring the additional costs connected with making the house insurable.

3. Stick with your trusted broker.
Often, real estate agents suggest you talk with their insurance person to hurry the process along. In fact, that call might have the opposite effect as things can quickly get complicated when multiple brokers make inquiries to the same insurance company on behalf of the same homeowner. Here’s why: The manner in which a broker presents the property and homeowner to carriers greatly impacts the chances of obtaining insurance. And unfortunately, if a carrier declines to cover a property as a result of incorrect or badly-positioned information, your trusted professional’s hands are tied—it is legally impossible to overturn the decision.

Bonus tip 2: If you are planning a major renovation before move-in, it is important that your broker knows, so they can speak to the carrier to incorporate whatever additional coverage might be necessary. Your broker should also review the insurance sections for all contracts with contractors and add any relevant certificates of liability and worker’s comp to the homeowner’s policy.

4. Don’t let cost be your sole consideration.
Many people, after sparing no expense on their new house, suddenly become cost-conscious when they turn their focus to insurance While that is understandable, you could be hurting yourself down the line. When comparing policies, you want to make sure your carrier is in good financial standing and is known for paying claims. Also ask, in the event of a catastrophic loss, whether they will replace your home to the same standards or simply fix it with whatever material is least expensive? Ultimately, the choice is yours but it’s worth knowing what you are —and are not—paying for.

5. Add as many layers of protection as you can.
In the end, insurance carriers want to do everything possible to prevent loss, and it is in your best interest to consider their recommendations for how to do so. These might include clearing areas of brush, installing shutters, or strapping items down prior to a storm. Likewise, they will often suggest you install smart safeguards, from low-temperature sensors to water leak detection systems to centrally monitored fire and burglar alarms.

We want you to revel in the excitement that comes with purchasing a new home. You can always rely on us to make the risk management process that goes along with that undertaking as simple as possible.