What insurance do I need to purchase when I buy a home?

When buying a home, there are a number of types of insurance to consider.  

Title insurance covers you, as the homeowner, against the risk of a future problem with your legal ownership of (or “title to”) your home.  Title issues don’t arise very often - they include things like a stranger claiming that he or she is the actual “true owner” of your home, or the risk that a neighbor later claims that they have an unrecorded easement to enter and exit your property for certain purposes.  Title insurance is typically very affordable. In CA, different counties have different conventions as to whether the buyer or seller covers the cost of the title insurance policy procured at closing.

Homeowners insurance will be mandated by your bank or other lender if you have a mortgage, and will cover damage (from fire, hail, vandalism, etc) and any personal liability (e.g., a guest falls down stairs).  If your home is in a federally-designated flood hazard area, you will be required to purchase separate flood insurance for your home in addition to standard homeowner’s insurance.

Home warranty insurance covers the breakdown of any system or appliances, such as HVAC, garage door, plumbing, oven electronics, etc.  We always recommend that new homeowners buy a home warranty plan for at least their first year of home ownership, and then decide whether to self-insure or keep the insurance.  

Finally, earthquake insurance is obviously worth consideration here in the Bay Area.  It isn’t cheap (at ~$1,000 a month or more) and can have a high deductible (~10% of your home value).  Note also that fires resulting from an earthquake would be covered under your homeowners insurance.

There are other types of specialized insurance like war, natural hazard, sinkhole, etc that you could purchase if you wanted to cover all of your bases, but we find that these specialized types of insurance aren’t purchased very often.

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Buyers' Guide