Here are the insurance policies homeowners need and the ones to skip

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Congratulations! You’re a homeowner. Now that you’ve made the step up from renting, you’re no doubt bombarded with offers for insurance of various types related to owning a home.

We’re going to tell you which policies are “must haves” as a homeowner and which policies just aren’t worth the money.

RELATED: Home buying 101: Buying new construction vs. buying used

Thumbs up or thumbs down on these insurance policies for homeowners?

Buying a home is one of the most exciting financial transactions you’ll ever make in your life. But as we all know, owning comes with additional costs you don’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.

We want you to keep more money in your pocket to be able to handle the unexpected. Here’s a look at insurance policies that offer necessary protection that you simply can’t do with it, and an examination of which policies will amount to little more than financial fluff in your life.

Buy these policies

Homeowners insurance

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

And when you’re shopping the market for home insurance, remember that money expert Clark Howard says the decision shouldn’t strictly be about who offers you the lowest premium. See the criteria Clark says matter even more, plus review this list of the best and worst home insurers.

Flood insurance

Flood insurance is not covered by your homeowners policy. That’s why you need to buy an additional policy through the federal government if you are in a high-risk area (and sometimes even if you’re not, if it’s required by your lender).

Today, the average federal flood insurance premium is somewhere around $650 to $750 annually. Of course, if you live in a very low-lying coastal area, you will pay a lot more than that to account for your higher risk level.

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

Again, if you own your home free and clear with no mortgage, you aren’t required to have flood insurance. But it’s a smart idea to have a policy, based on where you live.

Read more about flood insurance here.

Owner’s title insurance

When you buy a home, there’s a misconception that you pay a premium for title insurance and that protects you in the event someone comes along and contests your ownership of the property.

But here’s the real deal: That insurance just protects the bank, not you. So you should never rely on the title insurance the that lender buys; you need your own policy.

Where should you shop for owner’s title insurance? We’ve got three suggestions here.

Don’t buy these policies

Downpayment insurance

Back during the real estate bust of last decade, people were alarmed after they’d saved 20% downpayment to buy a home and then the value of the home collapsed.

That gave rise to downpayment insurance. The pitch is that an insurer will pay off your house if the value of your home collapses to a catastrophic level.

Clark’s take? “You can’t insure against every possibility in life,” the consumer champ says. “The odds that housing values are going to tank again? It could happen, but I’m not counting on it.”

In fact, right now we’re facing the opposite situation, where home values are going up so much in many areas of the country that homeowners are having to contest their property tax assessments!

So downpayment insurance is a definite thumbs down.

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 beneficiary in the event of your death, so that your mortgage can be paid off.

Worse yet, premiums during the life of your loan tend to be roughly 10 times the free market rates for insurance.

Home wiring insurance

Designed to protect you when jacks or telephone wire in your home’s walls fail and need replacement, home wiring insurance is far from a necessity in your life as a homeowner.

In fact, even telecom companies that sell this stuff acknowledge as much.

“The fact is, your telephone wire and jacks are made to last for many years and generally don’t malfunction just because of age,” Hawaiian Telecom notes online.

And here’s the final nail in the coffin on this one: Most insurance is regulated at the state level, but this is one kind that’s typically unregulated.

That means your state’s insurance commissioner likely won’t be able to help you if a dispute arises between you and your telecom company over this insurance.

Home warranties

With policies typically starting at around $400/year, a lot of homeowners think a home warranty means they’re buying peace of mind when it comes to replacing failing appliances or systems in their home.

But nothing could be further from the truth! Customers routinely complain about long wait times for service, subpar replacement equipment and a long list of policy exclusions.

Need more convincing not to buy a home warranty? Check out this crowdsourced list of home warranty nightmare scenarios from our audience.

Individual warranties on specific appliances sold by the retailer

If you’ve followed money expert Clark Howard for any length of time, you know he never, ever, ever buys extended warranties.

Why not? Well, for starters, most electronics and appliances have low rates of failure. Plus, you can further stack the odds in your favor by using the right credit card to extend the manufacturer’s original warranty for free!

More insurance stories on Clark.com:

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