5 Insurance Moves to Make When You Buy a House

If you’re buying a house, you’re probably already thinking about homeowners insurance. Protecting your biggest asset is essential, but it’s more than just insuring the structure itself and your belongings. There’s making sure you can keep up with payments, even if something devastating were to happen.

“Insurance is a risk management tool — you should look at all the risks you face and identify what you’re willing to shoulder yourself versus what you want to offload to an insurance company,” said Katherine Sojo, a wealth manager at Evensky & Katz/Foldes Wealth Management in Miami.

Making smart updates to your overall insurance portfolio can protect your home, your family and your peace of mind.

This one’s a no-brainer. If you’ve taken out a mortgage, your lender likely required you to get homeowners insurance. To make sure you have , multiply your home’s square footage by construction costs per square foot in your area. (An appraiser or insurance agent should be able to get you an estimate.)

To estimate personal property coverage, do a walkthrough of your home and add up the monetary value of your belongings. (Take videos you can refer to if you have to file a claim.) You’ll need to decide whether to cover your possessions’ actual cash value or their replacement cost value. Actual cash value policies are cheaper, but your payout will be reduced by depreciation.

If you have to relocate while your home is being repaired, additional living expense coverage will pay for hotels, meals and other necessities. The cap on this coverage is usually 30% of your dwelling coverage.  Most insurers will reimburse for one year of living expenses, though some offer up to two years and there are policies with no limit.

A standard part of homeowners insurance, liability coverage protects you financially if you’re held responsible for someone else’s injuries or property damage. But medical bills, legal fees and other costs can easily exceed your policy’s liability limits. Umbrella insurance, also known as excess liability insurance, provides an extra layer of protection. It “sits on top” of your existing policy and kicks in when you’ve exhausted your regular policy’s coverage.

In some cases, it can mean the difference between going bankrupt and remaining financially solvent.

“If you own a home, you’re probably a very good candidate for excess liability insurance,” Sojo said. “It can protect you from a lawsuit if someone tries to take assets from you, whether that’s property or an investment account. “

People with a high net worth are encouraged to take out an umbrella policy, as are homeowners with children, dogs and high-risk features like a swimming pool or a trampoline, or who employ workers in their home.

“Excess liability insurance “is probably one of the cheapest options out there,” says Sojo. A $2 million policy costs about $380 per year.

Travelers, one of our top picks for umbrella insurance, offers plans up to $10 million that also cover legal fees, damages outside the U.S., and events not included in standard liability policies — such as libel, slander, defamation of character, and invasion of privacy. 

The average mortgage payment is close to $3,000. Factor in other housing expenses, like home insurance, property taxes and utilities, and you’re easily looking at your biggest monthly expense.

“Consider what happens to your lifestyle — what happens to these expenses — if you or your partner were to pass away,” said Sojo. A life insurance policy can ensure there’s money to replace lost income.

“It’s really hard to tell people how much life insurance they need, because everyone has a different situation they’re trying to protect,” Sojo said. “But one way to get a ballpark idea… is to multiply your annual income by 10.”

A term life insurance policy can protect your family during your peak earning years, when you’re still paying your mortgage or saving for your children’s college education.

Term life is only in effect for a limited period — typically 10, 15, 20 or 30 years — but it’s significantly cheaper than permanent life insurance.

A $500,000 term life policy would cost a 30-year-old male about $30 a month, according to Policygenius. The same level of coverage with a permanent whole life policy would run more than $400 a month.

Nearly half of American Gen Z, Millennial and Gen X households reported living paycheck-to-paycheck in 2024, according to a Bank of America study. That’s a situation that would have dire consequences if even one household member was sidelined from work due to a disability.

While life insurance is important, it’s more likely that you’ll face a serious illness or injury during your working years. Disability insurance can replace between 40% and 70% of lost income, but only 35% of civilian workers have access to long-term disability insurance through their employer, according to the U.S. Bureau of Labor Statistics.

If you’ve just taken on a mortgage, find out if your job offers disability coverage. If not (or if you’re self-employed), consider buying a policy. Insurance marketplace Breeze lets you instantly compare quotes from several insurers and choose the one with the optimum benefits and rates.

After you close on your house, let your car insurance provider know. Many will consider your status as a homeowner favorably when calculating your rate. According to The Zebra, homeowners pay about $166 less a year for auto insurance than renters.

You might consider enrolling in home insurance with the same company you get your auto policy with. Most insurance companies offer for signing up for multiple policies. The most common incentive is for pairing auto and home, but you can find reductions with renters, umbrella, life and even pet insurance.

“You should try to bundle everything,” Sojo said. “Sometimes that means more discounts than you anticipated.”

State Farm offers as much as 25% off for bundling, and Amica shaves up to 30% when you combine home, umbrella and life insurance.

Bundling doesn’t automatically mean you’re getting the best rate, however. If auto insurance with one carrier is more expensive than with another, a discount may not offset the difference.

Get quotes with the same coverage levels and deductibles, Sojo said, “and see who has the best to offer with what you’re looking for.”

At CNBC Select, we work with experts who have specialized knowledge and authority, grounded in years of training and experience. For this story, we interviewed Katherine Sojo, a wealth manager at Evensky & Katz/Foldes Wealth Management. Katherine earned a master’s degree in finance from Florida International University and has been a certified financial planner for over 10 years.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice to help them make informed financial decisions. Every insurance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of insurance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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