Buying a home with a friend? Here’s how to insure it

Homeownership costs are rising, with the average monthly mortgage payment doubling in the past decade. Now, some millennials are meeting the challenge with a new weapon: the power of friendship.

One in 10 millennial homeowners (ages 28-43) has purchased a house with a friend, a significant departure from earlier generations who traditionally bought homes either with a spouse or solo, according to a recent Bankrate survey. While buying a home with a friend may offer younger homebuyers a way to split costs, it also has the potential to complicate financial processes that weren’t built for platonic partnerships. When your finances aren’t already linked with your homebuying partner’s, making big decisions and filling out paperwork could lead to confusion or even conflict.

When insuring a home with a friend, communication is key

The good news is that while buying a home with a friend can be a difficult process, insuring that home together doesn’t have to be. For friends who purchase homes together, the process of getting home insurance is fairly similar to the standard home insurance process for married or single homeowners. Just like couples, friends buying a house together will need to align on their coverage needs, compare home insurance quotes, review potential offers and settle on a policy that works for their budget and home.

Rhys Subitch, a senior editor on Bankrate’s staff, recently joined the ranks of millennial buyers who’ve insured a home with a friend. “The process was fairly easy,” they say. “We used a marketplace to get multiple quotes at once and dug through the matches for one that met our needs. I sorted through what we qualified for and made quick notes for each company, then we talked through cost versus coverage for each.”

The most difficult part of the process, according to Subitch, wasn’t shopping for insurance; it was bundling their new home insurance policy with an existing policy for their car: “But that was more their systems not talking to each other and less to do with the fact that I bought with a friend.”

In other words, be prepared for some red-tape delays when merging your insurance with a friend, and be ready to discuss your priorities, budget expectations and level of comfort with risk. Being aligned on what you and your friend want from your home insurance can simplify the process.

How to include a friend on your homeowners insurance policy

If you and your friend own a home together and your names are both on the deed, you should both be listed on the homeowners insurance policy as named insureds. Since you both have an insurable interest in your jointly owned property, you’ll both be covered by the policy, and you’ll both have the option to file claims, change your coverage or even cancel the policy and switch to another insurer.

If your situation is less straightforward — for instance, if only you or your friend are listed on the deed to the home — you may need to take extra steps to add them to your policy. Because home insurance only covers the named insured, their relatives and people under 21 years old in their care, a friend who co-owns your home but isn’t on the deed may need to be added with a special endorsement as an additional insured.

The additional insured won’t have the same control over the policy but can file claims if necessary. If you’re unsure how to add your friend to your homeowners insurance policy, ask your insurance agent about adding an additional insured endorsement and whether it will affect the cost of your coverage.

What type of homeowners insurance should I purchase?

Every homeowner has different insurance needs. Because home insurance isn’t mandated by law, there’s no official guidance on the type or amount of insurance you need to purchase beyond the requirements set by your mortgage lender. After that, it all comes down to your home, belongings and personal finances.

To determine how much home insurance to buy, you may want to follow these steps:

• Assess your home: How old is your home — and how old is the roof? What is the square footage? What type of building materials were used in its construction? You’ll also want to consider how you use your home; frequent hosting might require a higher liability limit.
• Create an inventory of personal property: Part of your home insurance policy will cover your personal belongings, such as furniture, appliances, clothing and other items. Take stock of what coverage you and your friend need and ask your agent about items like jewelry or art that may require extra endorsements.
• Understand replacement cost vs. actual cash value: Depending on the policy, you may be able to choose between replacement cost or ACV coverage.
• Nail down your budget: Knowing how much wiggle room you have in your homeowners budget could help you make decisions like how high to set your deductibles, whether to add a policy rider or whether to opt for ACV or RCV for certain coverage.

Frequently asked questions

• Can I add someone who doesn’t live with me to my home insurance?

  Generally speaking, home insurance covers insureds who own and reside in the property and any family members who live with them. Non-family members, including friends who do not live at your house, can’t be added to your home insurance.
  

• Does homeowners insurance cover my roommate?

  In most cases, a roommate who isn’t related to the named insured won’t be covered under a standard homeowners insurance policy. Even significant others who aren’t legally married to the named insured may need to be added to a homeowners insurance policy as an additional insured, and the same goes for permanent roommates who aren’t relatives.
  
  
  If you’re a renter and your roommate is the homeowner with a home insurance policy, you would purchase renter’s insurance.
  

• Does it matter whose name is on home insurance?

  The name — or names — on your home insurance policy should match the name(s) on the deed to the house. The deed proves that those people have an insurable interest in the property and thus can be listed as named insureds.