< Back to Blog
Buying Homeowners Insurance

Before you close the deal on your new home, you’re going to be buying insurance for that home. Buying homeowners insurance can be a little bit confusing, but don’t worry! We’ve covered all the bases in this handy guide to purchasing your own insurance.

What Homeowners Insurance Is

Homeowners insurance protects you from catastrophic financial losses related to your home, like burglary, natural disasters, or major injuries that happen on your property. You usually pay the insurance premium along with your mortgage each month.

Without homeowners insurance, you could be be facing big financial losses if anything happens to or at your home. And if you’re getting a mortgage, lenders will require you to have homeowners insurance to protect their interest in your home.

What Homeowners Insurance Covers

When you’re buying homeowners insurance, you need to know that policies vary, and you’re responsible for understanding exactly what is and isn’t covered in your policy. All that information will be in your policy’s contract, which you should keep in a safe place. Coverage often includes:

  • The home, including its major systems (like plumbing and electrical)
  • Your personal belongings
  • Sheds, fences, or other structures on your property
  • Personal liability coverage/ medical payments for people hurt on your property
  • Your hotel bills, food costs, and other expenses if you can’t live in your home while it’s being repaired after a covered catastrophe

What Basic Homeowners Insurance Does Not Cover


You might be surprised to learn that flooding isn’t usually covered by home insurance policies. Homeowners insurance will usually cover a flood inside your home (like if a pipe breaks), but it doesn’t cover natural disasters. If you’re in an area prone to flooding, you definitely need flood insurance.

Even if you’re not in a flood-prone area, it’s a smart idea to think about purchasing flood insurance. 25% to 30% of all paid losses for flooding are not in designated flood zones, also called Zone X, areas.

If you’re still on the fence about purchasing flood insurance, check out these stats from the National Flood Insurance Program.

  • From 2010 to 2014, the average residential flood claim was around $39,000
  • In 2014, the average flood insurance policy premium was just $700 per year

Be aware that flood insurance typically has a 30-day waiting period, so your coverage will not kick in until that point.


Home insurance doesn’t come with coverage for earthquakes, either. You may not think that’s a big deal, since we don’t live in California. But earthquakes can happen in Portland, too, so you should at least consider it.

Costs for earthquake coverage vary depending on your exact location and the type of home you have. Here are some things to remember;

  • Older homes typically cost more to insure
  • Wood tends to hold up to earthquakes better than brick, making coverage less expensive
  • Your soil and the fault lines around you will affect the price of your coverage

Buying Homeowners Insurance

Pools and Hot Tubs

Last, a quick note on pools and hot tubs. If you have one of these in your yard, make sure that you purchase substantial liability coverage for your home. If someone has a serious injury or even drowns in your pool, you could be found responsible for the accident and have to pay out a lot of money. High liability limits will protect you if that happens.

Coverage Levels

Sometimes your lender will tell you how much coverage you’re required to have. Otherwise, you’ll have to use your best judgement about what you could afford to pay out of pocket in the event of a disaster. Make sure you include the contents of your home when you figure out how much coverage you need.

There are different types of policies—they range from HO-1 to HO-8. Most single-family homeowners should opt for HO-3. It’s comprehensive and will cover most dangers to your home, including fire and theft (but not earthquakes, floods, nuclear accidents, or war).

You also need to know how much money you’ll receive in the event that something happens to your home. Choose coverage that will allow you to replace to your home in the event of a catastrophic loss. If you’re not going to be able to pay much out of pocket, for instance, you’re going to want replacement cost coverage. If you have a robust emergency fund and could cover some of the cost of rebuilding, cash value coverage might be enough for you.

  • Cash value: This type of coverage pays you for exactly what your home was worth when something happened to it, minus depreciation (and there’s always depreciation).
  • Replacement cost: This doesn’t factor in depreciation, meaning you’ll get more money to replace your home. The replacement cost is the amount it would take to rebuild your house with similar quality materials.
  • Extended coverage: This will pay you above your policy limit (20 to 30%), which is designed to help you if the cost of construction suddenly goes up after a large-scale disaster.

Buying Homeowners Insurance

How to Get a Good Deal on Homeowners Insurance

You can expect to pay around $35 a month for every $100,000 in your home’s value, but it will vary depending on your location and the insurance company you go with. Extra coverage and living in a risky area will obviously increase that price.

Compare your deductibles: Your deductible is the amount you’ll pay out of your own pocket before the insurance kicks in. A policy with a $100 deductible will cost more than a policy with a $1000 deductible.

Pay attention to the size of your deductible—having the highest deductible you can afford will save you money every single year, and it will also ensure that you only use your coverage when it’s totally necessary, keeping your premiums low.

Shop around: Policy prices can vary quite a lot, so feel free to shop around. Oregon’s insurance department, consumer publications, and online reviews can help you decide what the best choice is for you. Get quotes for similar policies from at least three different lenders.

Bundle discounts: Sometimes you can get discounts if you bundle your home and car insurance together.

Other discounts: You may get discounts for things like installing deadbolts or alarm systems, having the right number of smoke and carbon monoxide detectors, or maintaining your home properly.

Keep in mind that the cheapest policy is not always the best one. You don’t want to be underinsured, but you also don’t want to pay more than you have to for something you will hopefully never use.

Questions to Ask a Potential Insurer

Prepare a list of questions to ask potential insurers. Here’s a good list to start from:  

  1. What type of coverage is included in each option? How much liability coverage does this policy have? How much additional living expense coverage?
  2. What exclusions does this policy have?
  3. What is the deductible for this policy?
  4. Are there limits on coverage for my personal possessions, including jewelry and fine artwork?
  5. Is there a way to reduce the policy’s cost? Would home improvements or safety features lower the cost?
  6. Do you have 24-hour claim service? How do I file a claim?

What is an Umbrella Policy?

You may have heard of an umbrella policy. There are certain situations where regular homeowners insurance isn’t good enough to cover all of your assets. An umbrella policy protects you beyond the limits of your home insurance policy.

As we’ve already mentioned, your regular policy comes with liability coverage in case you’re sued. For example, imagine that someone trips down your stairs, gets hurt, and decides to sue you. If the court awards that person $200,000, your homeowners insurance will pay out—but only up to the limits of your policy.

Liability limits often start around $100,000. Believe it or not, that may not be enough if there’s a major incident involving you, your kids, or your pets at your home. This is where an umbrella policy can save you, by kicking in after your homeowner, renter, our auto coverage is exhausted.

An umbrella policy is a great idea if you have significant assets—a valuable home, or your own business, for instance. They’re fairly inexpensive—$1 million is between $150 and $300 per year.

Buying Homeowners Insurance

Comprehensive Loss Underwriting Exchange

If you’re buying a new home, ask the seller for the Comprehensive Loss Underwriting Exchange, also known as CLUE. It contains all the records for insurance claims on a house. This is important because any claims filed for that property in the last five years could mean that you’ll pay higher premiums.

The seller may not hand this information over, but if they do, it can help you make an informed decision about whether or not to purchase that home.

Buying Homeowners Insurance

If you’re buying a new home and need to get homeowners insurance, we hope this guide helps you feel a little surer about what you’re doing. You need adequate protection for what may very well be the biggest purchase of your life.

< Back to Blog