by J.M. Pressley
Note: this was originally written for the Sammons Financial blog in 2015. It has been revised for 2025.
Buying your first home is one of the biggest financial commitments you will ever take on. There are thousands of dollars at stake–the median American home value in 2025 is more than $400,000 (source: Bankrate.com), a 60% increase in the last 10 years. The last thing you want is to put your new home and money at risk. So what primary options do you have to protect yourself? You may find that a combination of insurance policies is the answer.
Homeowners Insurance
While no states legally require homeowners insurance, most lenders won’t finance your mortgage without it. Besides, you really don’t want to risk having to replace your home out of pocket in the event of a disaster. You need know what coverage you need and factor that into your cost projections.
Flood Insurance
If your prospective new home lies within a designated flood plain, your mortgage lender will require flood insurance as a condition of approval. This will not be covered by your homeowners policy. You’ll specifically need to purchase it, most likely through the government’s National Flood Insurance Program. You also have the option to purchase flood insurance even if you don’t live within a flood plain—and those properties account for approximately a quarter of all flood claims. It’s cheaper to buy if you don’t live within a flood plain, so that’s something to consider.
Appliance Insurance/Home Warranty
Your homeowners policy also won’t cover the cost of replacing major appliances in your household that aren’t losses incurred by natural hazards or theft. If your furnace dies in the middle of winter, that’s your cost. And if you’ve ever priced a furnace, that cost can be considerable. Appliance insurance (or a home warranty plan) can help offset the money you’ll pay out of pocket—but be sure to understand the terms and conditions before buying it.
Term Life Insurance
Finally, the last thing you want is for a personal tragedy to turn into a financial catastrophe for your surviving loved ones. One option is to purchase a term life policy for the amount and term of your home’s mortgage. For instance, if you have a 15-year mortgage loan of $300,000, you could purchase a reasonably priced 15-year term life policy in that amount. That way, if anything were to happen to you or your spouse, the survivor could at least pay off the loan without the worry of losing the home on top of everything else.