House Hunters Should Check for Insurance Issues

A strong job market and the prospect of rising mortgage rates could persuade more Americans to enter the housing market this year. Most homebuyers focus on finding a home that meets their needs while keeping mortgage and tax payments in an affordable range. To help protect this sizable investment, buyers should also consider the price and availability of homeowners insurance.

Uncovering and addressing potential issues early in the process could help buyers avoid costly surprises associated with a particular property. If you’re searching for your dream home, it might be a good idea to consider factors that affect homeowners coverage.


Claims History

During escrow, a seller may provide a Comprehensive Loss Underwriting Exchange (CLUE) or A-PLUS report, both of which provide details of prior claims for fires, flooding, and other events that may have caused damage to the property. These reports could shed light on undisclosed information regarding past or potential problems with the home, some of which could make it more difficult or expensive to insure.

Condition and Location

Keep in mind that many insurance companies want to inspect a home before they offer to insure it. Homes with older electrical and plumbing systems could cost more to cover. Properties with damaged roofs, overgrown trees, leaning fences, or other visible issues may also trigger higher premiums. Some problems may have to be addressed during escrow in order to obtain a policy.

You might pay less to insure a home with a fire hydrant nearby, or more for one that is in a remote location. In fact, a home that’s at risk from wildfires and located far from firefighting services could be deemed uninsurable.

Special Policies

Most homeowners insurance policies protect against a basic set of perils, including fire, lightning, wind, hail, vandalism, and theft. However, flooding and earthquakes typically are not covered by standard policies. In areas that are documented as flood zones, your lender may require that you purchase a separate flood policy. If your home is located in an area subject to flood or earthquake risk, it’s a good idea to secure additional coverage that could protect you (up to the policy limits) from a total loss if disaster strikes.

Cost Considerations

If you can afford to pay a higher deductible on a claim, increasing your deductible from $500 to $1,000 could reduce your premium. Installing safety features such as deadbolt locks, smoke detectors, and monitored fire and burglar alarms may also lower insurance costs.

Think Ahead

Before you commit to purchasing a property, it might be wise to consult your insurance agent for a quote and to discuss any unusual circumstances that might affect your ability to obtain coverage. Mortgage lenders typically require proof that homeowners insurance is ready to take effect on the closing date, so waiting until the last minute to shop for a policy could cause frustrating or even expensive delays at the close of escrow.