Homeowners Insurance: Your Most Important Policy
Your mortgage lender requires it, but even if they didn't, you'd want it. Homeowners insurance protects the structure of your home, your belongings inside it, and covers liability if someone gets injured on your property.
When shopping for homeowners insurance, pay attention to whether the policy covers replacement cost (what it costs to rebuild at today's prices) vs actual cash value (depreciated value). Replacement cost is almost always worth the slightly higher premium.
Life Insurance with a Mortgage
If someone else depends on your income to pay the mortgage, you need life insurance. A term life policy that matches your mortgage length is the simplest approach — 30-year mortgage, 30-year term.
The coverage amount should be at least enough to pay off the mortgage balance, but ideally enough to also cover living expenses for your dependents for several years.
Umbrella Insurance
Once you own a home, your liability exposure increases significantly. An umbrella policy provides extra liability coverage — typically $1M or more — that kicks in after your homeowners or auto policy maxes out.
Umbrella policies are surprisingly affordable — often $200-400/year for $1M in coverage. If you have any assets worth protecting, it's one of the best values in insurance.
Title Insurance
You'll buy this at closing and never think about it again — but it protects you if someone later claims they have ownership rights to your property. Your lender requires a lender's policy; the owner's policy (which protects you) is optional but strongly recommended.
It's a one-time premium paid at closing, not an ongoing cost.
Flood and Earthquake Considerations
Standard homeowners insurance does not cover flooding or earthquakes. If you're in a flood zone, your lender will require flood insurance through FEMA's National Flood Insurance Program (NFIP) or a private insurer.
Earthquake insurance is optional everywhere but worth considering if you're in a seismically active area. Deductibles tend to be high (10-20% of coverage), so it's really for catastrophic events.