Fine Print Guide

Guide

Buying a home

Your lender will require proof of home insurance before closing. The policy you choose matters more than people expect, because the exclusions are where the big surprises are.

At a glance

  1. Get home insurance before closing Often required by someone else
  2. Check the flood zone Often required by someone else
  3. Look at earthquake and wind Optional
  4. Understand title insurance Often required by someone else
  5. Review liability and life coverage Optional

  1. 1 Get home insurance before closing

    Often required by someone else

    Choose a Coverage A limit that would rebuild the house at today's prices. Compare deductibles, and see whether the policy pays replacement cost for belongings.

    Read more: Homeowners insurance

  2. 2 Check the flood zone

    Often required by someone else

    If the home is in a high-risk flood zone, a federally regulated or backed lender will require flood insurance. Outside those zones it's optional, but standard home insurance doesn't cover flood, and many flood claims come from moderate-risk areas.

    Read more: Flood insurance

  3. 3 Look at earthquake and wind

    Optional

    In earthquake regions, consider a separate policy. On the coast, check the hurricane or wind deductible, which may be several thousand dollars.

    Read more: Earthquake insurance

  4. 4 Understand title insurance

    Often required by someone else

    Title insurance is a one-time purchase at closing. It protects against problems with ownership, like an old lien or a forged deed from a past sale.

    • The lender's policy is required and protects only the lender.
    • The owner's policy is optional and protects you, for as long as you own the home.

  5. 5 Review liability and life coverage

    Optional

    A home is an asset worth protecting with enough liability coverage, maybe an umbrella. If a partner or children depend on your income to pay the mortgage, term life insurance is inexpensive.

    Read more: Umbrella insurance · Life insurance

Things that often surprise people

  • Private mortgage insurance (PMI) protects the lender if you stop paying, not you.
  • Home insurance is based on the cost to rebuild, not the price you paid.
  • Your insurance is often paid from an escrow account through your mortgage payment, so check it once a year anyway.
  • Sewer backup, flood, earthquake and slow leaks are excluded from standard policies.