When should I Start Looking for Homeowners Insurance?

A house may be the biggest investment you make in your life, so you’ll want to fully insure it against damage (by fire, wind, vandalism, earthquakes, floods, and mold, for example). A comprehensive homeowners’ insurance policy should cover the replacement value of your house and other structures, and partial replacement of valuable items of personal property like art and
computers.

But beware: So-called “replacement cost coverage” for your house pays you only a preset amount, so you’ll want to make sure that’s enough to cover your actual rebuilding costs. You’ll probably want some liability coverage as well, in case visitors to your property slip and fall or are otherwise injured.

Start shopping for homeowners’ insurance soon after your purchase agreement has been signed. Don’t make the mistake of putting this off until escrow is about to close—finding a good policy at a reasonable price is getting harder and harder, due to recent losses and clampdowns in the insurance industry.

The problem is particularly acute in states such as California and Texas, where expensive mold claims have pushed the industry into a state of panic. Homebuyers who have filed past claims for water damage (a precursor to mold) or who are buying a house with a history of mold problems may find themselves unable to get any insurance at all. Homebuyers with a history of making frequent claims on their insurance policies have similar problems. Some homebuyers now add a contingency to their purchase contract stating that the deal can be cancelled if they can’t find adequate insurance.

Shop carefully—and if you’re in a state with a troubled insurance industry, buy a policy with a
high deductible. This will lower your premium cost and prevent you from racking up a history
of claims that could endanger your ability to renew your policy or get future insurance.