Insurance When Buying a House

There are many things to keep in mind about insurance when buying a house. Below we’ve summarized the questions we hear most often, along with answers from our team of MA home insurance experts. If you don’t see the answer you need, please give us call: 508.339.2951. We are always happy to help!

What kind of insurance do I need when buying a house?

Home insurance is the obvious answer. But today’s “standard” homeowner’s policy is anything but standard. It’s important to understand exactly what is covered, under what circumstances, and to what extent. Many people assume they will be handed a check to replace everything they own after a fire, burglary, or a flood. Unfortunately, inadequate coverage limits may mean that some property isn’t fully protected. And in certain cases (floods are a common example), a standard home insurance policy may offer no coverage at all.

This is why it’s important to sit down with an experienced agent and walk through different risks and loss scenarios. Be prepared to ask questions like:

• What’s the difference between actual cash value coverage and full replacement cost coverage?
• What do you recommend for coverage limits and sub-limits?
• Do I need umbrella insurance? (BTW: this is especially important if you own a dog, coach youth sports, serve on a Board, etc.)
• Do I need flood insurance in Massachusetts?
• Do I need building ordinance insurance?
• Do I need high-value home insurance? (for properties valued at $1M or more)

Now is also a good time to ask about appraising and buying coverage for your engagement ring, other valuable jewelry or collectibles.

When do I need to purchase new home insurance (how soon before my closing date)?

Your mortgage lender will need a copy of the insurance binder in order to prepare documents for your closing. In order to give him/her ample time, you should probably allow at least a month between the closing date and the date you sit down with your insurance agent.

What information do I need to gather when buying insurance for a new house?

Your agent will need the new home’s address, along with some basic information about you: your name, phone number, email address, etc. You should also come prepared to answer questions like:

• When was the home built?
• What is the total square footage?
• Are there any detached structures, like a shed or garage?
• How old is the roof/plumbing/electrical system?
• Are there any security features? Any alarm system?
• Type of fuel and fuel appliances?
• Any insurance claims on this property in recent years? (It’s okay if you don’t know this. Your agent can look it up. If a prior claim on the property is found, you may need to ask the seller if the damage has been repaired.)

Do I need to pay the full premium, up front, for insurance when buying a house?

This depends on the type of home loan you’re getting (if any) and your lending agreement. Usually, if you’re making a down payment of less than 20 percent, the lender will escrow your home insurance and property taxes at closing, which means the full premium will be due as part of your closing/settlement costs. If your down payment is 20 percent or more, you may be able to pay the year’s premium in advance or make other billing arrangements. If you want more information about your options—including the pros and cons of prepaying versus bringing the funds to closing—ask your mortgage broker or lender directly.

Should I bundle my car insurance when buying a house, in order to save money?

This is a GREAT question, since bundling insurance is often a smart idea. That said, if your car insurance just recently renewed, it doesn’t always make sense to switch carriers mid-policy. You can ask your agent to run the quote both ways—with your family’s cars and without—to see if the potential savings would offset any penalties your current carrier might charge. If the cost benefit isn’t there right now, make an appointment to contact your agent next year, several weeks before your car insurance is up for renewal.

Will my credit score affect my home insurance rate?

Yes. Although your credit score does not affect your auto insurance rates in Massachusetts, it DOES factor into home insurance. Your agent will use a lookup tool that ranks your credit according to a tiered system while encrypting the exact score. Insurance companies use that tier (along with other factors) when determining the rate they will offer you.

Yikes! The annual premium I was quoted is WAY too high! Is there any way to lower it?

If you already have a quote for insurance when buying a house, and you’re currently experiencing sticker shock, you could ask your agent to run the quote with a higher deductible. (A deductible is the amount you would have to pay out of pocket before your insurance coverage kicks in.) If you’re willing to pay $1,000 or even $2,000 in the event of a claim, your annual rate might decrease significantly. You can read more about this topic in our blog, What Should My Insurance Deductible Be?

Other moves that could help defray costs down the line include adding a security system, updating the plumbing or electrical, or even opting for paperless billing if available. Ask your agent what she or he recommends.

Meanwhile, congratulations on your new home!