Here Are the Insurance Policies Homeowners Need To Get and the Ones To Skip


Congratulations: You’re a homeowner! Now that you’ve made this huge purchase, expect to be bombarded with offers for various types of insurance.

In this article, I’ll tell you what types of insurance are “must-haves” for a homeowner and which policies just aren’t worth the money.

Thumbs Up or Thumbs Down on These Home Insurance Policies?

Buying a home is one of the most exciting financial transactions you’ll ever make in your life. But as we all know, ownership comes with costs you didn’t face as a renter.

When something goes wrong with your home, you’re the one who is responsible for fixing it — not the landlord.

Team Clark wants you to keep more money in your pocket so that you can handle the unexpected, so we don’t want you to buy insurance you don’t need.

Ready to get started separating the good from the bad?

Buy These Policies

Here are some insurance policies you definitely need to consider buying:

Homeowners Insurance

If you have a mortgage, homeowners insurance isn’t optional. Your home lender will require you have this policy. But even if you’re living mortgage-free, this is a wise policy to have to protect your investment.

Money expert Clark Howard says when you’re shopping for home insurance, the decision shouldn’t strictly be about who offers you the lowest premium.

“Homeowners insurance is only for use in a catastrophic situation, so it’s crucial to have the best coverage in case something does happen to your home.”

Resource: Best and Worst Home Insurance Companies


Flood Insurance

Flood insurance is not covered by your homeowners’ policy. It may make sense to buy it as an add-on if you are in a designated flood zone, and your lender may require it.

Today, the average federal flood insurance premium costs more than $700 a year. If you live in a low-lying coastal area, you may have to pay a lot more than that to account for the higher risk level.

A standard flood insurance policy, available through, covers up to $250,000 worth of flood damage to your home.

If you own your home free and clear, you aren’t required to have flood insurance. But it may be a smart idea to have a policy depending on where you live.

Resource: Things To Know Before You Buy Flood Insurance

Owner’s Title Insurance

Although it’s sold as optional coverage, Clark says owner’s title insurance is something you really need to consider.

When you buy a home, there’s a misconception that standard homeowners insurance protects you if someone contests your ownership of the property.

But here’s the real deal: That insurance just protects the bank, not you. That’s why Clark says you should never rely on the insurance that the lender buys to protect your homeownership; you need your own policy.

Resource: Things To Know Before You Buy Owner’s Title Insurance

Don’t Buy These Policies

Now let’s look at some insurance policies you can skip.


Mortgage Life and Disability Insurance

Mortgage life and disability insurance is sometimes called “croak and choke insurance.” The idea here is that you buy a policy naming your mortgage lender as a beneficiary. If you die or become disabled, this insurance pays off your house.

Instead of mortgage life and disability insurance, Clark recommends term life insurance, which is usually cheaper and can pay off your mortgage, too!

Resource: How to Buy Term Life Insurance in 7 Easy Steps

Home Warranties

With policies typically costing between $300 to $600 a year, a lot of homeowners think buying a home warranty means they’re buying peace of mind when it comes to replacing failing appliances or systems in their home.

But Clark thinks that nothing could be further from the truth. He says too many people who buy home warranties end up complaining of long wait times for service, subpar replacement equipment and policy exclusions.

Trust me on this: Don’t waste your money on a home warranty. Instead, save your money for when something does break in your home.”

Resource: Is a Home Warranty Worth the Money?

Home Title Lock

While often confused with owner’s title insurance, Home Title Lock is actually only a company that provides a monitoring service. You only need owner’s title insurance, not Home Title Lock, to protect your ownership of a property.

Resource: Home Title Lock: Is It The Same As Home Title Insurance?

Final Thoughts

Owning a home is expensive enough without paying for insurance policies you don’t need.

Instead of investing in obscure insurance policies, Clark wants you to regularly set aside a little money for incidental expenses that pop up.


“People think that a home increases in value,” the savings guru says. “But it’s actually the land that a house sits on that may well increase in value over time. The actual house itself — the structure — requires continual tender loving care, maintenance and repair.”

That’s why Clark wants you to have a fix-it fund.

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