Insurance and Finance

8 Property Insurance Questions to Ask Before You Buy a New Home

By Peter Simek 2.3.20

Buying a new home is one of the scariest experiences in life, according to research. A 2018 study found that 40% of Americans believe purchasing a new home is the most stressful event in modern life; 33% admitted that they broke down in tears at some point during the home-buying process.

The reactions are understandable. Home buying is a high-stakes, complicated, and sometimes bewildering process. Luckily, there are skilled experts to guide you along the way — such as your insurance agent.  

Too often, insurance is an overlooked aspect of the home-buying process — just another box that needs to be checked before closing. But it is important not to overlook the fact that your property insurance policy is what will protect the largest investment most Americans make in their lives against calamity.

When you are shopping for property insurance for your new home, it is important to ask the right questions so you can stay informed about exactly what you are purchasing and what your policy is protecting. Here are a few key questions that every homeowner should ask their agent before closing on a new home.

1. What are the red flags in my inspection?

There are many things that make homes attractive to potential buyers: curb appeal, layout, the number of bedrooms, space for a growing family, interior design or architecture, to name a few. Rarely, however, does a solid roof, up-to-date plumbing, or electrical rewiring make the list. But these can have a significant impact on how your home is insured.

A good, trusted home inspection is the first step toward making sure you will be able to purchase the right policy for your new home, says J.J. Wilson, a Texas Farm Bureau Insurance agency manager in Canton.

2. Is the roof in good condition?

“One of the things that is so important to a homebuyer, whether new or seasoned, is to get an accurate, detailed inspection on the roof,” Wilson says. “We often look at a home, and the roof is not in the condition that is described or is older than they thought it was. We want to get accurate information on the age of the roof and its condition.”

3. How old is the plumbing and wiring?

Wilson says that homebuyers should also make sure they pay attention to the age of their basic household systems, including the heating and air conditioning, electrical, and plumbing.

“For older homes, has the plumbing and electrical been updated or are you still dealing with breakers from the 1950s or 1960s?” Wilson says. “Sometimes homes have updated cosmetics, but other things not updated. It is important to look deeper than what you see.”

4. Will I be eligible for replacement cost value coverage?

One of the reasons the age of the basic home functions matter is that they could affect whether you can obtain replacement cost coverage or a policy that only covers actual cash value. Wilson says this is a key policy difference that is often confusing to home buyers.

“The simple way of explaining it that I use is by explaining personal property coverage,” Wilson says. “If you have a theft of a 10-year-old TV and you have replacement cost coverage, we’re going to pay for what it costs to get a new TV. If you have actual cash value, we are going to pay minus the depreciation of the item.”

In the case of a TV, that means an actual cash value policy won’t cover the full cost of replacing the TV. With bigger-ticket items, like a damaged roof, an actual cash value policy could leave you underinsured in the event of catastrophic damage. Wilson says he always recommends homebuyers purchase a replacement cash value policy, but on older homes with older roofs and other systems, sometimes only actual cash value policies are available.

5. What deductible should I choose?

Buying a home is expensive, with lots of hidden costs that can sneak up on potential homebuyers. It might be tempting, then, to try to save money by choosing an insurance plan with a high deductible. But opting for a higher deductible can be risky for homeowners, depending on their financial situation, and sometimes it could mean that a loss is effectively not covered if its cost falls below the deductible amount.

“I’m cautious when people want to raise deductibles, but I just remind them that if you start raising these deductibles, when you have a minor claim, you are not going to have any coverage because the loss won’t exceed their deductible,” Wilson says.

In general, Wilson recommends homeowners purchase a policy with a deductible equal to 1% of the value of the home.

6. Am I in a floodplain?

If a home is in a federally designated flood plain, flood insurance will be necessary, and the price can vary greatly depending on the area’s designation. It’s important to look into this so it doesn’t become a surprise later in the process.

7. What isn’t covered that I need to know about?

Not all insurance policies are made equal, and not all possible events are covered by a property insurance policy. It is important to ask your Texas Farm Bureau Insurance Agent before you purchase your policy what is covered.

“If the cause of loss is not one of the named perils, it is not covered,” Wilson says.

8. Do I need to add a special rider policy?

Sometimes, special rider policies are necessary to cover specific things outside your property insurance; one common example is coverage for mold.

It is a lot to navigate, particularly when there are so many other things to keep track of during the homebuying process. But your Texas Farm Bureau Insurance Agent has the knowledge and experience to make it all go as smoothly and as stress-free as possible.

Read this first-timers guide to buying property insurance.

Coverage and discounts are subject to qualifications and policy terms and may vary by situation. © 2020 Texas Farm Bureau Insurance