Is homeowner’s insurance included with a new home purchase?

Even after 26 years in this business, there are still surprises every now and then. Like the question above, for example. But, especially if this is a first time home purchase, I can see why this idea might be made. If you don’t know, you don’t know.

One of the things that drives this idea comes from car manufacturers, of all things. Many have started offering insurance at the time of sale. Tesla is a good example. They offer Tesla Insurance, auto insurance that is purchased through their app. It can happen before you get your new car and it appears to be “integrated” or “built in” with the car.

Another is the existence of insurance companies that work together with banks. The referral is made to an “in-house” agency or referral agency and this is also seen as a “package deal” or “all-in-one”, especially if the mortgage lender helps with the acquisition. signed documents for the process.

Homeowners insurance is a separate service and should be used separately

Regardless of how it looks, home owners insurance is not “bundles” and buying a new home. There are two reasons:

  • Homeowners insurance is based on the concept of insurable interest. The owner has an insurable interest and the policy is written in the owner’s name. The new owners will have a new policy written to show their interest in the insurance.
  • Most people have to take out a mortgage to buy a home. That loan provides the money to do that. Homeowner’s insurance provides protection and the ability to rebuild/repair the home in case of damage, such as fire, wind or lightning (just a few examples of many types of damage). As you can see, these are two completely different events. They are also managed and managed by different organizations.

In order to obtain homeowner’s insurance, an application must be completed and a policy submitted, along with a premium paid. But there’s more to it than that….. Read on to see how you can get to the finish line.

Homeowners insurance policy

When you find a “home”, you will sign up to buy it. Once the offer is accepted, it’s time to contact the insurance agent, because it usually takes 30-45 days to complete the sale (ie closing). IF you are paying for a loan, you must have your insurance BEFORE it closes or the loan does not close.

Step 1- Identifying “insurance”….homeowners insurance companies require the following:

  1. Changes in the area over the last 20-25 years (may be different depending on the state you are in- I’m talking Ohio here). This means heating, roofing, electricity and plumbing. This also means a CENTRAL heating system in the premises, not fired by a wood stove, pellet stove or other heat,
  2. If there is a pool, it should be fenced.
  3. Any additional heating system needs to be professionally installed and properly maintained (think wood burning stoves).
  4. IF the house had a problem, has it been addressed? Consider water damage or fire damage. Like you, insurance companies don’t want to buy lemons. Existing damage or recurring damage may prevent you from getting a homeowner’s policy.
  5. Have any dogs bitten before? Or is it a certain color? Regardless of your opinion on the matter, many insurance companies have restrictions on certain breeds of dogs or those that have bitten (meaning they don’t want them anymore).

Basically, the building must be in good risk, and the one with old systems, lack of maintenance and/or additional risks does not fall into that category.

Step 2 – Determine how much the home should be insured for.

Hands down is often the part that causes confusion. What you are paying to buy the house is the market value. What insurance companies use is the replacement cost. They are not the same (unless they build a new one). You can read about the exchange rate in detail.

Once the replacement cost is determined, the figure becomes the cost of living (also called Coverage A).

Your insurance agent can prepare a price and discuss additional items such as Water Backup, Jewelry, and Guns.

Step 3- Work with the lender to complete

Amidst all of this, a loan officer should be contacted to determine all closing requirements. Usually this consists of proof (such as a binder), and often an invoice (which is how most lenders get an annual fee at closing—especially when they keep an account). Once the requirements have been prepared and submitted, the closing should be successful.

Step 4- Work with the insurance provider to complete

THIS is where it was necessary to separate. Homeowner’s insurance is a separate policy and requires that the work be completed (like general insurance). So this can also be a warning sign- if you don’t sign the form, there is no insurance. Or if a process happens and you haven’t signed up for a program, that’s a whole other story (yikes).

So just remember- standard homeowner’s insurance is not included with your new purchase. It is a separate transaction, which requires completed work and signature, and the payment of a premium. Want to talk about homeowner’s insurance? Call us at (937) 592-4871 or fill out the form below.