Find Cheap Homeowners Insurance Quotes in Your Area
A home inspection is not always necessary in order to purchase homeowners insurance. That requirement is left to insurance companies to decide. If your house is more than 25 years old, and it hasn't been inspected recently, your insurer might require a 4-point inspection to qualify for a standard policy. If your home is currently under construction, other insurance policies exist to cover you during that phase.
Is a Home Inspection Required to Get Insurance?
Inspections can help insurers estimate a property's coverage requirements, but they aren't always required. If your home is old or hasn't been inspected in a decade, the insurer may want to determine how much risk they're assuming before they insure your property. Allstate, for example, didn’t require an inspection to insure a standard and recently renovated house in New Jersey when we got a sample quote.
Additionally, lenders will often recommend you have a home inspector evaluate a house before you buy it. While an inspection will cost you a few hundred dollars, it could reveal potential risks in the house that might cost thousands of dollars to repair. So it's in your best interest to have one before buying. However, home inspections are not federally required when purchasing a home, and many banks don't require you to have an inspection done in order to get a mortgage.
If you are selling a home, however, an appraisal to determine its value is typically required. Many people confuse appraisals and inspections, due to the similarities between the two. However, each serves a different purpose.
Can I Use an Appraisal to Get Home Insurance?
Your home insurance company may accept an appraisal when preparing your policy. However, this is entirely up to their discretion. Appraisals are not always as thorough as inspections, so if your house is old, an inspection may be required.
Appraisals are typically required when selling your home or applying for a mortgage or HELOC, and sometimes when refinancing your mortgage. Since any flaws in your house, such as structural damage or mold, will adversely affect your home's value, your appraiser will evaluate some of the same areas as an inspector. However, an appraiser's goal isn't to inspect the safety of your home, but to determine its value.
Inspections, on the other hand, are often paid for by a potential homebuyer, in order to determine if a house has any substantial flaws. If your contract with a seller includes a home inspection as a contingency, you have the legal right to back out of the purchase if your inspection reveals substantial damage the seller did not disclose.
Additionally, if a mortgage lender or insurance provider requires a home inspection, they may request certain renovations be done before they offer you a loan or insurance coverage. Some insurers may accept a recent appraisal in lieu of a home inspection.
One exception is an FHA appraisal. If you're purchasing your home with a Federal Housing Administration loan, the appraiser will perform "double duty," both estimating the home's value and evaluating the house to make sure it meets the Department of Housing and Urban Development's standards for health and safety.
What is a 4-Point Home Inspection?
A 4-point inspection is a brief inspection that is often required when purchasing homeowners insurance—especially on a house that is more than 25 years old. It allows insurers to determine how much risk they would take by offering you a home insurance policy and how much to charge you.
For example, an inspector might notice that your plumbing is old though still in decent working order. They may factor the system’s age into their rates. Alternatively, the inspector might find a leak causing water damage to your basement ceiling. In this case, they may require that repairs be made before they approve you for a homeowners insurance policy.
4-point inspections focus on these four parts of the house:
These elements of a house have a finite lifespan. For an older home that hasn't been renovated, an insurance company will want to determine the risk of a claim in the near future. The inspector will inspect each element and determine its condition—old, new, professionally repaired or damaged.
The typical home inspector conducting a 4-point inspection would not be qualified to do a detailed assessment of any repairs needed. For example, if an inspection were to determine that your aging HVAC unit needs improvement, an HVAC specialist would be required to identify exactly what repairs or upgrades are necessary. If your home fails the 4-point inspection, you might not be able to purchase homeowners insurance until necessary remedies are made.
A 4-point inspection is not in-depth enough to evaluate all possible risks associated with a home, so it should not be relied upon when deciding whether to purchase a house.
What Else Might Be Covered in a Home Inspection?
Potential buyers typically pay for a substantial inspection, known as a "whole home inspection," which examines all aspects of the entire house. These inspections often take a few hours, covering a comprehensive list of possible issues. Like a 4-point inspection, a whole home inspection may lead to additional investigation by a specialist. Areas potentially covered by home inspections include:
- Electrical Systems: Is there any damage, such as fraying wires? If wiring is old, does it meet current safety codes?
- Plumbing System: Does the septic system have any drainage problems? Is the water pressure adequate?
- HVAC System: Does the furnace have any cracks? Is the air conditioning system efficient?
- Chimney: Does the chimney have any loose bricks or cracks that allow moisture to enter the house?
- Roof: Is the roof built to handle the weight of snow? Are any shingles damaged?
- Water and Mold Damage: Is there any black mold? Is the basement excessively damp, and likely to suffer from flooding and mold damage after heavy rain? Are there cracks in the foundation that will lead to leaks?
- Pests: Are there signs of termites or a rodent infestation?
- Lead-based Paint and Asbestos: If there are signs of either material, a specialist may be called to investigate.
Can I Get Home Insurance if My House Fails an Inspection?
If you own a house that has failed a home inspection, you might not be approved for a homeowners insurance policy until you fix the problems. Alternatively, you might receive a policy that stipulates that certain repairs must be made within a limited time (usually 30 days) for your policy to remain valid.
A house might fail a 4-point inspection for defects such as leaking pipes or a damaged roof that's not structurally sound. If you're not interested in making the repairs yourself, perhaps in return for a reduced sale price, you can negotiate with the current owner to fix the issues.
If your home doesn't qualify for a homeowners insurance policy because renovations are required, you still have one insurance option. A surplus lines policy, also known as builder's risk insurance or vacant property insurance, is specifically for property that's under construction, and for risks that are not covered by standard insurance carriers. While this form of insurance is typically more expensive than a normal insurance policy, it may provide necessary coverage while you renovate your home.