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Updated:          June 5, 2018

As a potential new homeowner, remember that Homeowner’s Insurance will be required before your loan request can be finalized. Commonly known as fire and liability insurance, you are encouraged to “shop” for your insurance coverage immediately upon finalizing your purchase contract.

Home insurance has become more difficult to acquire.  The insurance industry now uses what they call the “clue system” to determine both the owner’s and the property’s ability to qualify for insurance coverage.  This Clue system apparently tracks whether you, the borrower, has ever filed an insurance claim as well as whether the property itself has ever had a claim filed on its behalf. Insurers use this information to sometimes increase the premium amount or, in some cases, to deny coverage. So, it is important to arrange your insurance coverage early in your transaction process.

Here are a few things to consider as you shop for and/or compare insurance plans:

You might start your shopping with the insurance company with whom you have your auto(s) insured, renters insurance, etc.  There might be a savings when including homeowners  insurance coverage as a part of an umbrella like policy. Make sure you know what the cost is for just the home coverage so that you might, if you wish,  compare the cost with other companies.

There is often the question of whether you should include earthquake coverage.  This can be pricey.  This is clearly a personal “comfort zone” decision for every home owner.  Check the deductible amount (typically fairly high) and discuss this with your insurance representative.

Flood insurance will be required only if the property is located in a flood zone.  Flood insurance can be expensive.  If you purchase property in a flood zone, avoid surprises and determine the cost of flood insurance early in the transaction process.

You are seeking “replacement value” coverage.  This means that you are required to only have sufficient insurance to replace the improved/structural portion of your property.

Discuss the “deductible” portion of your policy. Insurance carriers are warning that if owners make an insurance claim it is likely that the annual premium cost will increase.  In some situations, after filing a claim, the insurance coverage may be terminated when it is next up for renewal. The lower the deductible the higher the insurance premium. Thus, it might make sense to acquire a higher deductible amount as you may be unlikely to make claims for smaller losses. For your information, many lenders allow a maximum of $1000 deductible. If you own other property, this may be a good time to review the deductible coverage on all your policies.

In some cases, the insurance company may need to physically inspect the property. You may want to attend this inspection visit so that you will know the decisions upon which your premium cost is based.

See ‘Homeowner’s Insurance .. . A Few Details” in this tip sheet section

 Word/HAR Webpage/Need Insurance