Home Insurance 101 –
What Buyers Need to Know Before Closing

Buying a home is an exciting milestone, but it comes with its fair share of headaches—one of which is home insurance. It’s not the most thrilling part of the process, but getting it wrong can cost your clients big time. Delayed closings, skyrocketing premiums, or coverage gaps that leave them vulnerable when they need protection the most—these are the risks of treating home insurance as just another checkbox on the to-do list.

I’m Dan Ratkewitch, and in this edition of Closing Insurance Gaps, we’re breaking down what every buyer, agent, and lender needs to know before closing the deal. Whether you’re helping first-time buyers or seasoned investors, these insights will ensure your clients are fully protected while keeping their transactions smooth and stress-free.

Replacement Costs vs. Market Value – A Common Misconception

One of the biggest mistakes homebuyers make is assuming their insurance policy should match the purchase price of the home. It seems logical, but in reality, coverage should be based on replacement cost—the actual cost to rebuild the home from the ground up if disaster strikes.

Why does this matter? With construction costs at an all-time high, the price to rebuild could far exceed the market value of the home. If the policy is based on the wrong value, homeowners could be left covering a massive shortfall out of pocket.

✅ Pro Tip: Buyers should ensure their policy reflects the true cost to rebuild—not just the market value or loan amount. If their agent isn’t running those numbers, they need a new agent.

Deductibles – Higher Isn’t Always Smarter

Sure, choosing a high deductible can lower the premium, but is it really worth it? Let’s say your client saves a couple hundred bucks a year, but when a storm hits, they’re stuck with a $5,000 out-of-pocket repair bill. That’s not exactly a win.

✅ Pro Tip: The sweet spot for most buyers is a $1,000–$2,500 deductible—high enough to keep premiums reasonable but low enough to avoid financial strain in an emergency. It’s also worth checking how much the premium actually drops with a higher deductible—it’s not always a huge difference.

Endorsements – The Hidden Lifesavers

Endorsements are the hidden gems of home insurance. These are the add-ons that provide extra protection beyond the basic policy. Most buyers don’t think about them—until it’s too late.

Some of the most important endorsements include:

• Water backup coverage (for sump pump failures and sewer backups)

• Scheduled personal property (for high-value items like jewelry, art, and collectibles)

• Guaranteed replacement cost (ensures full coverage for a rebuild even if construction prices spike)

✅ Pro Tip: If a home has unique features or the buyer owns valuables, endorsements aren’t optional—they’re essential.

Timing is Everything – Don’t Wait Until the Last Minute

One mistake that causes major closing delays? Waiting until the final week to secure home insurance. If the lender doesn’t get proof of coverage in time, the entire deal can grind to a halt.

✅ Pro Tip: Buyers should start shopping for insurance as soon as their offer is accepted. This gives them time to compare options, avoid rushed decisions, and ensure everything is in place well before closing.

Bundle and Save – The Easiest Discount to Secure

Everyone loves a good deal, and bundling home and auto insurance is one of the easiest ways to save. Most insurers offer significant discounts when buyers bundle policies, reducing costs without sacrificing coverage.

✅ Pro Tip: Agents should encourage their clients to ask about bundling—it’s a simple way to offset the cost of must-have endorsements.

Quick FAQs: Home Insurance Must-Knows

❓ Can buyers switch insurance after closing?
✔️ Yes, but it’s much easier to get it right from the start.

❓ What happens if the replacement cost exceeds the policy limit?
✔️ Without guaranteed replacement cost coverage, buyers are responsible for the difference. Not fun.

❓ Do lenders care about endorsements?
✔️ Not directly, but they do care that the property is adequately insured. Endorsements protect the homeowner—and by extension, the lender’s investment.

❓ Is flood insurance included?
✔️ No. Flood insurance is always a separate policy. If the home is in a flood zone, lenders will require it.

❓ How often should buyers review their policies?
✔️ At least once a year or after major changes like renovations or purchasing high-value items.

The Bottom Line

Home insurance isn’t just another step in the closing process—it’s the safety net that protects your clients’ biggest investment. Helping buyers understand replacement costs, pick the right deductible, and lock in the endorsements they need will set you apart as an expert who truly looks out for their best interests.

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