When do you need to get homeowners insurance? In truth, owning a home means you almost assuredly want to get coverage – and if you’re buying a house, then you likely need it before you close.
Home insurance is a critical tool that protects your investment by helping you cover costs when your home is damaged by covered perils. Let’s take a closer look at when you should buy a policy as well as when you may need to update the coverage you already have.
When should I get homeowners insurance when buying a home?
People usually get home insurance at some point during the home-buying process. The main reason? Their mortgage lender requires it.
The idea here is pretty simple. Your lender is investing in the property, so before it finalizes the loan, it wants proof of insurance in the name of the homebuyer for the structure’s replacement cost before closing. That way the mortgage company knows its investment is protected.
“Closing” is the moment when official ownership of a house transfers from the seller to the buyer. Your lender may ask for proof of insurance anywhere from three days to three weeks prior to your closing date. To give yourself time, you probably want to start shopping for home insurance once you’ve signed the contract on a house.
Do I need to pay for a whole year of homeowners insurance?
Home insurance premium payment schedules vary by insurance company. Some insurers offer annual, biannual, and quarterly plans; others may also let you pay every month.
When you’re buying a home, your lender may require you to pay the entire premium upfront, or it may want you to escrow your premium. With escrowed premium, your lender is responsible for making your premiums payments to your insurer, and your home insurance premium becomes part of your mortgage payments.
Other reasons to get homeowners insurance
You also need to shop for new homeowners insurance if you receive a cancellation or nonrenewal notice from your current insurer. A nonrenewal notice indicates your insurance company has decided to end your coverage when your current policy expires. A cancellation notice, however, means your insurance company is dropping you midterm.
In either case, your insurer has to notify you a certain number of days before either a nonrenewal or cancellation takes effect. This gives you time to look for a new policy to protect your home.
However, if you don’t get coverage in time and you have a mortgage, then your lender may get you force-placed insurance. This is a type of home insurance that protects your lender’s financial stake in your property. It’s usually much more expensive than standard home insurance and often provides less protection. Your lender will adjust your mortgage payment to cover the cost.
When should I update my homeowners insurance?
You might think that once you have a policy in place, you’re done. No need to think about home insurance ever again!
But the reality is that your home insurance needs can change for any number of reasons. We’ve listed a few situations where you may want to check with your insurance agent to make sure your coverage is still appropriate.
When you renovate your home
Remodeling a home or adding a room usually increases the cost of rebuilding a home, and that can mean your current policy is insufficient. The issues? Your dwelling coverage is based on a replacement cost estimate. If that estimate has changed, then you may not have enough insurance to rebuild after a total loss.
A home that’s undergoing major renovations may also need an additional policy called builders risk insurance. This is a temporary coverage that protects against some unique risks that come with construction projects.
When your personal assets change
Home insurance also covers your belongings, such as furniture and electronics. These items are usually covered up to a certain percentage of the coverage on the dwelling structure. Adding items can mean your personal property coverage limit is insufficient, especially when valuable antiques or jewelry are involved.
Maintaining a home inventory of personal belongings, documented with a video, is an excellent idea. After adding major purchases, you can use the updated inventory list to adjust your home insurance.
When you bring someone new into the home
Getting married or cohabiting with a partner could trigger changes in your policy. For example, most home insurance policies grant insured status to your spouse, but you may want to talk to an agent about making your spouse a named insured. Doing so may give your spouse more authority over the policy. This might also be a good time to review your personal property coverage.
You also want to look at your personal property insurance if you’re cohabitating. Insurance companies don’t necessarily cover the belongings of residents who aren’t part of your immediate family.
Changes in income or your financial situation
If your income or net worth increases, you may want to increase your liability coverage. You may also want to revisit endorsements that can provide added protection, like identity theft coverage. Check with your agent to explore the value of increasing policy limits or adding endorsements.
On the other hand, should you have reduced income, you may want to see if you can make adjustments to your policy to help you save on your premiums. Raising your deductibles is one way to lower your premium. However, exercising caution is a prudent suggestion. You should not increase your deductibles to amounts where they may be difficult or impossible to cover in the event of a loss.
How to get homeowners insurance quickly
Whether you’re buying a new policy or updating your old one, you may need to get home insurance quickly. However, you don't want to rush your decision. You still want to find a home insurance provider that meets your needs. These tips can help.
Do your research
The internet is full of resources to help you determine home insurance companies' service levels and reputations. To aid in your selection, read testimonials, referrals, and customer ratings. While you're at it, look into the financial ratings of the insurance companies you’re considering. This can give you a good idea if they will be there when you need them most.
Ask about your timeline
Whether purchasing a home or reacting to a cancellation or nonrenewal, you want to verify that a new provider can meet your deadline. Inquire about what documentation it may require, including any home inspections that may have to take place, and a reasonable timeline to get everything squared away.
Compare quotes
We typically suggest that homeowners get at least three quotes to compare before they buy a policy. Moreover, we recommend you consider more than price for each policy. Make sure you’re comparing policies with similar coverage amounts and exclusions.
