If you are buying a single-family or a two-family house, you will need to purchase a year of homeowner’s insurance before closing. That insurance is reviewed by your lender, so they can be confident that you are fully covered, regarding their interests in your home.

At closing, you will be paying an additional 2-4 months of next year’s insurance bill, so that your lender can pay the annual fee, when it is due next year.

If you are unhappy with your homeowner’s insurance, the time to change it is when your insurance is renewing on its annual cycle.

Types of homeowner’s insurance

Liability coverage: This is mandatory coverage for attorney fees, court costs, and any judgement won against you for injuries sustained out of what is deemed negligence on the part of the homeowner. Your home inspector will mention these kinds of problems – they are in common– cracked walkway, loose handrails, anything that could that result in injury to anyone on your property. This usually few hundred to several hundred dollars on your annual bill.

Property coverage: This is mandatory coverage to insure against damage to the property.

Add ons:

Your lender has a standard for how much damage and liability they want, so they can recover the value of what you haven’t paid them back for yet. Here are some optional coverages that, depending on price, you may choose to add to your policy:

Water/sewer backup: this is a  relatively inexpensive endorsement ($50-100) based on size of home. It protects you if your sewer line backs up in house. This is a very common problem. It will happen in the winter,  if outside lines freeze up or roots get into pipe and clog it up.

Oil tank leakage : Most carriers won’t cover underground tanks anymore if you have your tank indoors on cement floor. If you have tank on dirt floor indoors, where it can leach into the soil, you must find a company that will cover you. This will cost you $100-200 yearly, depending on what tank is set upon.

Water damage:  Water damage is covered by homeowner policy if it originates from inside the home. Things like busted pipes. If covered by homeowner’s policy, you get full repair expense coverage, minus deductible up to the value of the dwelling.

Your insurance does not cover water from outside the house. The typical homeowners policies do not include flood insurance. That is a completely separate and distinct policy.

Earthquake insurance: This is relatively inexpensive in low risk areas like Massachusetts. Usually less than $100 a year.

Additional tip

Never call your insurance company to file a claim until you have gotten estimates for the damage and are certain the damages are covered by your policy.

Even if the insurance company denies the claim, or the damages are less than your deductible and the insurance company pays out zero, it will still count against you as a claim.

Tenant’s insurance:

Increasingly, landlords are requiring that their tenants purchase insurance that covers the tenant’s possessions against damage and theft. Many homeowners continue to keep that endorsement as part of their homeowner’s policy.

Thank you to Ray Lopez at Goosehead Insurance for information on the common endorsements.