Insurance Changes and Factors to Consider When Purchasing a New Home

Congratulations on your accepted home offer! When a home buyer has received an accepted offer for the purchase of a home there are several decisions to make such as the date you close on the home, whether or not you want to pay for a home inspection, to simple tasks such as forwarding your mail and what new purchases you will need to make after you close. Furthermore, there are insurance decisions you must make which are often overlooked during the home buying process.

Here is a comprehensive list of insurance changes and factors to consider when purchasing a new home:

-          If you are currently renting, what will happen to your lease contract with the property management? Will you have to break your lease contract or continue coverage up to a certain date? It is important to advise your independent agent about what will happen to your renter’s insurance so they can revise or cancel the policy accordingly.

-          If you currently own a home, what purpose will you use the home after you close on your new home? Do you plan to sell it or turn it into a long-term rental or short-term property investment? Or will a family member, child, or friend live there? If the home is not used as your primary residence anymore, it may need to be cancelled or rewritten to a different type of insurance policy to reflect appropriate rating and usage.

-          Do you plan to have a mortgage on the home or pay out of pocket for the new home purchase? Mortgage lenders usually require proof of home insurance coverage from your insurance company / agent such as a mortgage binder and invoice or paid receipt within 10 days of your closing date. Some mortgage lenders may require you to escrow your home insurance premium as part of your loan contract while others give you the option to choose. Otherwise, if you plan to pay cash for the home you are not required to have home insurance, but every home is a large investment and protecting it with home insurance is essential in catastrophic losses.

-          Is the new home purchase in a flood zone? If yes, are you required to purchase flood insurance? Some mortgage lenders will require you to purchase a separate flood insurance policy therefore make sure to confirm this because standard home insurance policies do not cover for inland flood.

-          Is it time to bundle your auto insurance with the new home insurance or keep it separate? For most insurance companies, bundling a home and auto may potentially save you more money with a multi-policy discount than having them insured separately with two different insurance companies.

-          If you have a domestic partner or are newly engaged, will you combine your auto and home insurance now that you own a home together? For most insurance companies, even if you do not combine both your autos with the home insurance, your domestic partner/ fiancé may still be required to be listed as a household member on your auto insurance policy when you move into the new home. They may not be rated as a driver on the policy, but their claim loss history and motor vehicle record may affect your eligibility to stay insured with specific insurance companies.

-          Does your insurance carrier offer optional home insurance coverages or packages to help enhance your home insurance policy. For example, if you have a finished basement, it would be important to consider purchasing water backup of sewer, drains, or sump pump discharge coverage. Other optional coverages to consider when you purchase home insurance are underground service line coverage, matching siding or roofing coverage, home cybersecurity / identity theft and fraud reimbursement coverage, etc.

-          Do you plan to have pets in the home such as dogs, cats, etc.? Are there any insurance guidelines on pet breeds or # of pets allowed? Some insurance carriers have tight guidelines on dog breeds to manage liability risks and certain dog breeds may pose higher risks which can mean denying coverage, charging higher premiums or excluding certain breeds from liability policies.

-          Do you plan to run a business out of your home such as a childcare business or crafting business, etc.? Some insurance carriers will not extend liability from the home insurance policy to your business if you operate one out of your home or may deny coverage altogether, while others may require you to add a specific endorsement and charge you an additional premium. To learn more about the impact of insurance on your new home purchase and review your personal insurance program, contact Paroubek Insurance at 920-347-9115.