Buying Your First Home in Ohio? What to Know About Homeowners Insurance

Buying your first home is exciting, but it also comes with a lot of things you probably haven’t had to think about before. Home inspections, appraisals, mortgage documents, closing costs and homeowners insurance can all come at you pretty quickly.

If you’ve never purchased homeowners insurance before, you may be wondering when you need to buy it, how much coverage you need, what your mortgage company requires and what the policy actually covers.

You don’t need to become an insurance expert before closing. But there are a few things you should understand before choosing a policy based solely on price.

Here are some of the things we recommend first-time homebuyers in Ohio understand before purchasing homeowners insurance.

When Should I Start Shopping for Homeowners Insurance?

Don’t wait until a few days before closing.

Once you have an accepted offer and know which property you’re purchasing, it’s a good time to start getting homeowners insurance quotes.

Starting early gives you time to compare more than just price. It also gives you time to address any insurance issues that may come up with the home.

The age and condition of the roof, electrical system, plumbing, heating system and other characteristics of the property can affect the availability and cost of insurance. Your home’s claims history can sometimes be a factor as well.

We occasionally run into situations where a buyer is only days away from closing and discovers something about the property that makes insurance more difficult or expensive than expected. Finding that out earlier gives you more options.

It also gives your insurance agent time to provide the documentation your mortgage lender needs before closing.

Do I Need Homeowners Insurance Before Closing?

If you’re financing your home, your mortgage lender will generally require homeowners insurance to be in place before you close.

Your lender will typically request evidence of insurance showing that coverage will begin when you take ownership of the property.

Your insurance agent can work with you and your mortgage company to provide the necessary documentation.

If you’re paying cash, there isn’t a mortgage company requiring you to carry homeowners insurance. However, going without coverage means accepting the financial risk if the home is seriously damaged or destroyed.

What Information Do I Need to Get a Home Insurance Quote?

Your insurance agent can usually gather quite a bit of information about the property, so you shouldn’t need to know every detail about the house.

Be prepared to provide information such as:

• The property address
• Your anticipated closing date
• Who will be living in the home
• Whether it will be your primary residence
• Information about renovations or recent updates
• Mortgage company information
• Information about pets
• Whether the property has a pool, trampoline or other potential liability exposures
• Information about your vehicles if you’re considering bundling your home and auto insurance

If you know about significant updates to the roof, plumbing, electrical or heating systems, mention those as well.

Accuracy matters. Your quote should reflect the home you’re actually purchasing.

Why Isn’t My Dwelling Coverage the Same as What I Paid for the House?

This is one of the most common questions new homeowners ask.

Your home’s market value and its estimated rebuilding cost are not the same thing.

The amount you paid for your home reflects more than the house itself. It can include the value of the land, neighborhood, school district, location and current real estate market.

Your dwelling coverage is generally based on an estimate of what it would cost to rebuild the structure after a covered loss, subject to the terms and conditions of your policy.

Construction costs can also be very different from the cost of buying an existing home. After a major loss, contractors may need to remove debris, work around an existing site and rebuild a single home rather than construct several homes at once.

That’s why you shouldn’t automatically assume your dwelling limit is wrong simply because it doesn’t match your purchase price.

What Does Homeowners Insurance Cover?

A typical homeowners policy contains several different coverages.

Dwelling Coverage

This covers the structure of your home against covered losses, subject to the limits, conditions and exclusions of your policy.

Other Structures

This can provide coverage for structures separate from your home, such as a detached garage, shed or fence.

Personal Property

This helps cover belongings such as furniture, clothing, electronics and other personal possessions after certain covered losses.

Loss of Use

If a covered loss makes your home uninhabitable, loss-of-use coverage can help with certain additional living expenses while your home is being repaired.

Personal Liability

Liability coverage can help protect you financially if you’re legally responsible for certain injuries to another person or damage to their property.

Medical Payments to Others

This can provide limited coverage for certain medical expenses when someone is injured on your property, subject to the policy terms.

Not every homeowners policy provides these coverages in exactly the same way. That’s one reason comparing policies solely by premium can be misleading.

Replacement Cost vs. Actual Cash Value: What’s the Difference?

This is one of the most important insurance concepts for a first-time homeowner to understand.

Replacement cost generally bases a covered loss on the cost to repair or replace damaged property with materials or items of similar kind and quality, subject to the policy terms and limits.

Actual cash value generally considers depreciation.

Imagine that a roof is 15 years old when it’s damaged by a covered loss. The cost of installing a new roof and the depreciated value of a 15-year-old roof can be very different amounts.

That difference can leave a homeowner with significantly more to pay out of pocket.

Don’t simply ask whether your homeowners policy has replacement cost coverage. Ask how replacement cost applies to the dwelling, personal property and roof.

Ohio Homebuyers Should Pay Particular Attention to Roof Coverage

Roof coverage deserves its own conversation when you’re purchasing a home in Ohio.

Wind and hail losses are a significant consideration for homeowners insurers, and companies don’t all treat roofs the same way.

Depending on the insurer and policy, factors can include:

• Roof age
• Roofing material
• Current condition
• Prior damage
• Replacement cost versus actual cash value
• Wind and hail deductibles
• Other roof-related limitations or endorsements

A home with a newer roof may qualify differently than one with an older roof.

This is also something to consider when you’re reviewing the home inspection. If the inspector identifies an aging roof or existing damage, don’t assume your new homeowners policy will pay to replace it later. Homeowners insurance is designed for covered losses, not pre-existing damage or normal deterioration.

Before purchasing a policy, ask how a covered roof loss would be settled.

How Do Home Insurance Deductibles Work?

Your deductible is generally the portion of a covered property loss you’re responsible for paying.

For example, if you have a $1,000 deductible and experience $10,000 in covered damage, you would generally be responsible for the first $1,000.

But here’s something first-time homeowners may not realize:

You may have more than one deductible.

Some homeowners policies have a separate deductible for wind or hail losses. Depending on the policy, that deductible could be a fixed dollar amount or a percentage.

A percentage deductible can be especially important to understand because it’s generally based on an insured value specified by the policy, not simply a percentage of the amount of your claim.

Don’t just ask, “What’s my deductible?”

Ask:

“What deductible would I pay for a wind or hail claim?”

What Doesn’t Homeowners Insurance Cover?

Homeowners insurance covers many types of losses, but it doesn’t cover everything that can happen to a home.

One important example is flooding.

Standard homeowners insurance generally does not cover flooding caused by rising surface water. Flood insurance is separate coverage.

Homeowners insurance also isn’t a home maintenance plan. Wear and tear, deterioration and other maintenance-related problems may be limited or excluded.

Water is another area where the cause of the damage matters. A sudden covered plumbing loss and water entering a home from outside aren’t necessarily treated the same way.

This is why asking whether “water damage” is covered doesn’t always have a simple yes-or-no answer.

Do I Need Flood Insurance if My Lender Doesn’t Require It?

Not necessarily, but it’s worth understanding your risk.

A mortgage company’s flood insurance requirement and your actual financial exposure are two different questions.

If your property is located in certain higher-risk flood areas and you have a federally regulated or insured mortgage, flood insurance may be required. But being outside one of those areas doesn’t mean flooding is impossible.

Consider the property itself, surrounding terrain, drainage, nearby waterways and what a flood loss would mean financially for you.

You can also obtain a separate flood insurance quote and decide whether the protection makes sense for your situation.

What About Water Backup Coverage?

This is an optional coverage I think homeowners should at least understand.

Water or sewage backing up through a drain or sump system isn’t necessarily covered the same way as other water losses under a standard homeowners policy.

Many insurers offer an endorsement that provides additional coverage for certain water backup losses.

If the home you’re purchasing has a basement, especially a finished basement, ask whether water backup coverage is included and what limit applies.

How Much Liability Coverage Should a First-Time Homeowner Carry?

There isn’t one liability limit that’s appropriate for everyone.

Your home creates liability exposures you may not have had as a renter. Someone could fall on your property, a tree could cause damage, a pet could injure someone or another situation could result in a liability claim.

Consider your assets, income, household and potential exposures when selecting your limit.

You may also want to discuss a personal umbrella policy. An umbrella can provide additional liability protection above the underlying limits of policies such as your home and auto insurance.

Higher liability limits are often relatively inexpensive compared with the additional protection they provide, so this is an area where it’s worth comparing your options.

Should I Bundle My Home and Auto Insurance?

Usually, it’s at least worth comparing.

Many insurance companies offer discounts when you insure your home and vehicles together.

But here’s where I think consumers sometimes look at bundling the wrong way.

Don’t ask only:

“How much is the home insurance?”

Look at what you’re paying for the entire household.

One company may have a slightly higher home premium but significantly lower auto premium, or vice versa. Coverage differences matter too.

Compare the total price and coverage rather than choosing a company based solely on which policy has the biggest advertised discount.

How Does Escrow Work With Homeowners Insurance?

If your mortgage includes an escrow account, your lender generally collects money for expenses such as property taxes and homeowners insurance as part of your mortgage payment.

The lender then uses the escrow funds to pay those bills when they’re due.

At closing, your initial homeowners insurance premium may be handled as part of the closing or escrow process.

One thing that’s important to understand:

Having an escrow account doesn’t mean your mortgage company chooses your insurance company.

You generally choose the insurer and policy as long as the coverage satisfies your lender’s requirements.

Your insurance agent can provide the lender with the documentation needed for closing and make sure the correct mortgage information appears on the policy.

Don’t Choose Your First Homeowners Policy Based Only on Price

There is nothing wrong with wanting a competitive insurance rate. You should.

But the least expensive quote isn’t automatically the best value.

Two policies with similar dwelling limits can handle the same loss very differently.

When comparing homeowners insurance, look at:

• Dwelling coverage
• Deductibles
• Wind and hail deductibles
• Roof settlement provisions
• Personal property settlement
• Water backup coverage
• Personal liability limits
• Available endorsements
• Important exclusions and limitations
• Claims experience
• Agent support

You don’t necessarily need the highest limit or every endorsement available.

You need coverage that makes sense for your home and your situation.

First-Time Homebuyer Insurance Checklist

Before you close on your first Ohio home, make sure you can answer these questions:

✓ When does my homeowners insurance take effect?

✓ Does my mortgage company have the evidence of insurance it needs?

✓ How was my dwelling coverage determined?

✓ What is my standard deductible?

✓ Do I have a separate wind or hail deductible?

✓ How would a covered roof claim be settled?

✓ Is my personal property covered at replacement cost or actual cash value?

✓ Do I have water backup coverage, and what is the limit?

✓ How much personal liability coverage do I have?

✓ Have I considered whether flood insurance makes sense?

✓ Did I compare the combined cost of my home and auto insurance?

If you can’t answer one of these questions, ask before finalizing your policy.

Frequently Asked Questions From First-Time Ohio Homebuyers

How early before closing should I get homeowners insurance?

Once you have an accepted offer and know which home you’re purchasing, you can start shopping for homeowners insurance. Starting early gives you time to compare coverage, identify potential insurance issues with the property and provide your mortgage lender with the documentation it needs for closing.

Can a problem with homeowners insurance delay my closing?

It can. If you’re financing the home, your lender will generally require acceptable homeowners insurance before closing. Issues involving the condition of the home, roof or other property characteristics can sometimes affect insurance eligibility. Starting the insurance process early gives you more time to address unexpected issues.

Does my mortgage lender choose my homeowners insurance company?

Generally, no. Your mortgage lender can establish insurance requirements for the property securing the loan, but you typically choose the insurance company and policy that satisfy those requirements.

Does my home inspection tell me everything the insurance company needs to know?

Not necessarily. A home inspection and an insurance company’s underwriting process serve different purposes. An inspection can provide valuable information about the home’s condition, but an insurer may use additional property information, reports, photographs or inspections when determining eligibility and coverage.

Will homeowners insurance pay for problems found during my home inspection?

Generally, homeowners insurance isn’t intended to repair pre-existing damage, wear and tear or maintenance problems identified before you purchase the home. Insurance is designed to cover losses that meet the terms and conditions of the policy after coverage begins.

Can I change homeowners insurance after I close on the house?

Yes. You generally aren’t locked into the insurance company you selected at closing. If you later change insurers and your premium is paid through escrow, make sure your mortgage company and insurance agent have the correct information so payments and refunds are handled properly.

Buying Your First Home in Ohio?

You already have enough to think about when buying your first home. Homeowners insurance doesn’t need to be another thing you have to figure out on your own.

At Bucklew Insurance, we help first-time homebuyers understand their coverage, compare their options and get the insurance documentation their lender needs for closing.

We’re a locally owned Allstate agency in Springboro, Ohio, serving families throughout Southwest Ohio.

If you’re buying your first home and have questions about homeowners insurance, call or text Bucklew Insurance at (937) 550-9596. We’re happy to walk through the coverage with you before you make a decision.