Purchasing a new home is always an exciting time, but it comes with many processes and procedures that must be completed before you receive the keys to your new house. In many cases, a buyer must first obtain a homeowners insurance policy before completing the transaction – a task which may require you to schedule a home property inspection.
But luckily, not all homeowners insurance policies require a home inspection as this requirement is set at the carrier’s discretion.
Do I need a home inspection to get insurance?
In many cases, a home inspection is required in order to obtain a homeowners insurance policy. Insurance carriers need to understand the level of risk they are taking on by insuring your home in order to set your premiums. The best way for them to assess this risk is through a home inspection. Not only is this helpful for insurers to evaluate the likelihood of you filing a claim, but a home inspection is highly recommended when purchasing real estate as it can help you identify hidden issues that otherwise would not be disclosed to you.
Not all insurers require a home inspection to obtain coverage. However, other entities involved in your real estate transaction may mandate an inspection. If you are working with a lender, they might stipulate that a home inspection be completed before they approve your mortgage loan. If you’re selling your home, a home inspection is not required. However, sellers are usually required to have an appraisal done to determine the home’s value.
Can I use an appraisal to get homeowners insurance?
Your homeowners insurance provider might accept an appraisal to prepare your policy, however, this is up at the carrier’s discretion. Appraisals do not serve the same purpose as inspections and are much less thorough in discovering potential risks. Especially if the home you plan to purchase is particularly old, you will most likely need an inspection completed rather than an appraisal.
If your insurance provider does accept an appraisal, the seller will have this information available since they typically need to pay for an appraiser to evaluate the home before placing it on the market. Home inspections, by contrast, are paid for by the homebuyer. In many cases, homebuyers will submit an offer on a property contingent upon home inspection, meaning they can legally back out of the contracted sale if the home inspection does not meet their expectations.
What to know about a home insurance inspection
Home inspections are comprehensive evaluations of your home or property that identify any underlying issues that might exist. This allows insurers to understand the level of risk they would assume by offering you a homeowners insurance policy. During a home insurance inspection, inspectors generally use the four-point inspection method to evaluate key areas of the home. This four-point inspection focuses on the following:
- Heating & Cooling Equipment (HVAC)
These items have a set lifespan, and insurers can use the information gathered through the home inspection to determine the likelihood that you file an imminent claim. However, home inspectors do not have the qualifications necessary to perform a detailed analysis of any needed repairs. For example, if the home inspector flags your plumbing system as needing work, you will need to hire a professional plumber to actually identify the specific repair required to fix the problem. If the property you plan to purchase fails the four-point inspection, you will not be able to purchase a homeowners insurance policy until the existing issues are remedied.
What else might be inspected?
A four-point home inspection is not as comprehensive as a whole-home inspection, and therefore is not necessarily recommended for buyers to rely on when making a purchasing decision. Instead, a whole-home inspection may be a better option as these evaluations analyze many additional areas of the home, including:
- Chimneys: Inspectors will look for any loose bricks or cracks that might allow moisture or pests to enter the home.
- Water & mold damage: Black mold, basement moisture, cracks in the foundation and more will all be identified through a whole-home inspection.
- Pests: Your home inspector will look for any evidence that termites, rodents and other unwanted pests exist in the home.
- Lead-based paint & asbestos: These dangerous materials were used in the construction of older homes, and may be identified by your whole-home inspector during their evaluation.
Tips for Passing a Home Inspection
When scheduling a home inspection, be sure to communicate with the seller regarding the date of the inspection. Since you do not yet own the home, preparing for the inspection will be the seller’s responsibility. There are many things that you can do to increase your chances of passing a home inspection, including:
- Clean the yard: When preparing for a home inspection, be sure to trim tree branches hanging too closely to your roof or home. Walk the perimeter to ensure all dirt and mulch is at least six inches from your home’s siding, and ensure all shrubbery is at least a foot from the home.
- Inspect the exterior: Inspect your siding for peeling paint, warped boards, gaps, cracks and other damage. Be sure your caulking and weather stripping is secure around doors and windows, and that they do not expose any nails. Look for any foundational cracks or damage, and ensure the gutters are cleaned and in working order.
- Prepare your plumbing: Test your sinks, showers, tubs, faucets and drains for clogs and drips. Be sure to identify any leaks that may exist and ensure your toilets do not run when flushed. Inspect your crawl space or basement for any leaks or water damage that need repair.
- Examine your electrical: Check that your lights, switches and outlets all function properly. Test your HVAC equipment as well to ensure electrical connections work as they should. Replace air filters in your heating and cooling equipment and make sure they are clean and clear of debris.
- Clean it up: Take care to thoroughly clean all areas of your home, including appliances, attics, crawl spaces, plumbing fixtures, HVAC equipment and more. If you have pets, be sure to either take them with you or keep them safely locked away during the inspection.
By taking the time to prepare ahead of the inspection, you can increase your chances of passing and obtaining the necessary insurance coverage.
What happens if my house fails the home inspection?
If you fail a home inspection, do not worry, it is still possible for you to obtain a homeowners insurance policy. In some cases, an insurer may issue a policy that stipulates you must make certain repairs within a set time frame (typically a 30-day period). For example, if your roof is damaged and in need of dire repair, your homeowners insurance provider might require you to have it replaced within a certain period of time in order to keep your policy in effect.
Some homes are simply too old for standard home insurance companies to insure. When this happens, you may have better luck finding coverage through companies that specialize in insuring high-risk properties. Insurance carriers in the excess and surplus markets are able to take on more risk than a standard carrier whose policies are financially backed by the state’s insurance department, making it easier for you to obtain coverage for higher-risk properties.
In some cases, you still might not be able to find coverage through the surplus market. If that’s the case, you may be able to get insured through your state’s FAIR Plan. The Fair Access to Insurance Requirements Plan is available in certain high-risk areas in your state where private home insurance coverage isn’t available. These plans are more expensive than those offered through the voluntary market and are intended as a last-resort for homeowners that are unable to obtain coverage through traditional means.
Frequently Asked Questions
What is the best home insurance company?
The best home insurance company depends on your specific needs, geographic location, property risk, discount eligibility and more. Homeowners need a policy that is affordable, offers the breadth of coverage they need and that is backed by great customer service. The best way to find the right homeowners insurance provider is by doing thorough research before making a decision.
Who pays for a home insurance inspection?
Home inspections are typically paid for by the homebuyer as part of the real estate transaction process. In many cases, a homebuyer may submit an offer on a property contingent upon a positive home inspection. That means you can legally walk away from the contracted sale if the home inspection fails or comes back otherwise unsatisfactory.