First-Time Home Buyer Insurance

Key Takeaways

First-time home buyers are required to get a home insurance policy before you can close on your home.

A standard home insurance policy covers your dwelling, personal property, liability, medical payments and temporary living expenses after a covered loss.

The average homeowner pays $3,417 per year, or $285 per month, for $250,000 in dwelling coverage with a $1,000 deductible.

What Should First-Time Home Buyers Know About Homeowners Insurance?

Homeowners insurance is responsible for the cost to repair or rebuild your home after a sudden or unexpected covered event, like a fire, hail or vandalism. It also covers your liabilities if someone gets hurt or their belongings are damaged by accident on your property.

Lenders require you to have a policy before you close on your mortgage to protect their interests, as your home is the collateral for your loan. If your home is damaged or destroyed and you don't have coverage, you might stop making payments, and the lender loses its investment. An active policy ensures the lender's financial interest in the property is protected throughout the life of the loan.

DO YOU NEED HOME INSURANCE?

Home insurance is required by most lenders. You can stop carrying lender-required homeowners insurance once you've paid off your mortgage in full and own the home outright. At that point, no lender has a financial stake in the property, so there's no contractual requirement to maintain coverage. That said, going without homeowners insurance means you'd pay out of pocket for any fire, theft or weather damage, so most financial advisors recommend keeping a policy even after your mortgage is paid off.

Home Insurance Coverage Types & What They Include

Homeowners insurance policies bundle several types of coverage into one plan. Each type protects a different part of your finances after a covered loss.

Home insurance covers inclusions are:


Dwelling	Pays to repair or rebuild your home's structure after covered damage. This includes walls, roofing, flooring and built-in systems like plumbing and electrical.
Other Structures	Covers detached structures on your property, such as fences, sheds and detached garages. Most policies set this limit at 10% of your dwelling coverage.
Personal Property	Reimburses you for belongings damaged or stolen in a covered event. This includes furniture, electronics, clothing and appliances.
Loss of Use	Pays for temporary living expenses if your home is uninhabitable after a covered loss. This can include hotel costs, meals and transportation.
Liability	Covers legal and medical costs if someone is injured on your property. Most policies start at $100,000, though many homeowners choose higher limits.
Medical Payments	Pays medical bills for guests injured on your property, regardless of fault. Limits are usually $1,000 to $5,000 per person.

What Doesn’t Home Insurance Cover?

Standard homeowners insurance won't cover floods, earthquakes, sewer backups, pest infestations or damage from normal wear and tear. Floods and earthquakes are excluded because they're catastrophic events that can damage thousands of homes at once, which would make standard policies far more expensive for everyone.

Maintenance issues and pest damage fall outside coverage because homeowners insurance is built to cover sudden, unexpected events; not gradual problems a homeowner is expected to prevent or repair on their own.

How Much is Homeowners Insurance for First-Time Buyers?

The average cost of homeowners insurance for $250,000 in dwelling coverage is $3,417 per year, or about $285 per month. Your actual premium depends on several factors.

Rates can change based on your desired coverage limits:


$100K Dwelling / $50K Personal Property / $100K Liability	$150	$1,799
$250K Dwelling / $125K Personal Property / $200K Liability	$285	$3,417
$500K Dwelling / $250K Personal Property / $300K Liability	$482	$5,787
$750K Dwelling / $375K Personal Property / $500K Liability	$683	$8,193
$1MM Dwelling / $500K Personal Property / $1MM Liability	$880	$10,565

Factors Affecting Your Home Insurance Premium

Several factors determine what you'll pay for homeowners insurance. Some you can control, like your deductible and coverage limits, while others depend on your home and where you live.

Where Your Home Is Located

Homes in regions with frequent severe weather or high crime rates carry higher premiums. Proximity to a fire station and fire hydrant can also affect your rate.

How Much Dwelling Coverage You Carry

The more coverage you buy, the more you'll pay. Insurers calculate dwelling coverage based on your home's rebuild cost, which can differ from its purchase price.

Your Deductible Amount

A higher deductible reduces your annual premium but increases your share of costs after a claim. Most insurers offer deductible options ranging from $500 to $2,000.

Your Credit-Based Insurance Score

Insurers in most states use a credit-based score to help predict claim likelihood. Homeowners with strong credit histories tend to pay less.

Your Claims History

Past claims, even at a previous address, can increase your rates. Most insurers look back three to seven years when reviewing your record.

The Age And Condition Of Your Home

Older homes with aging systems are more expensive to insure because they're more likely to have plumbing, electrical or structural issues. Renovating key systems can reduce your premium.

Best Home Insurance for First-Time Buyers

AIG Insurance offers the best homeowners insurance for first-time buyers, with rates starting at $1,089 per year or $91 per month for $250,000 in dwelling coverage. The best insurer for you depends on factors like your location, coverage needs, home age and budget. The table below compares the top homeowners insurance companies for first-time buyers based on MoneyGeek's analysis.


AIG Insurance	$91	$1,089
Amica	$119	$1,425
CSAA	$126	$1,514
AAA	$128	$1,539
State Farm	$179	$2,151
Chubb	$352	$4,221
Farmers	$232	$2,785
Allstate	$245	$2,942
Homesite	$211	$2,526
Nationwide	$278	$3,341
American Modern	$174	$2,089
Progressive	$459	$5,505
Travelers	$453	$5,435

How to Buy Homeowners Insurance for the First Time

First-time buyers can purchase homeowners insurance through an insurer's website, by calling directly or by working with an independent agent. The process differs by company, but MoneyGeek outlines the common steps to buy home insurance below.

1
Calculate Your Coverage Needs
Estimate how much it would cost to rebuild your home from the ground up; this sets your dwelling coverage amount. Your lender may require a minimum, but your rebuild cost is a better guide. Add up the value of your personal belongings to set your personal property limit.
2
Get Quotes From at Least Three Companies
Request quotes from multiple insurers so you can compare premiums for the same coverage. Use the same dwelling limit, deductible and liability amount on every quote. Independent agents can pull quotes from several companies at once, which saves time.
3
Read the Fine Print
Check what each policy excludes before you buy. Standard policies don't cover floods, earthquakes or sewer backups, so ask about separate policies or endorsements if you need them. Look for sub-limits that cap payouts on categories like jewelry or electronics.
4
Pick Your Deductible
A lower deductible means a higher premium, and a higher deductible means a lower premium. Choose an amount you could pay out of pocket without financial strain. Most insurers offer deductible options between $500 and $2,000.
5
Buy Your Policy Before Your Closing Date
Lenders require active homeowners insurance before they'll approve your closing. Aim to have your policy in place two to four weeks before your scheduled closing date. You'll likely need to prepay the first year's premium as part of your closing costs.

How to Save on Homeowners Insurance as a New Homeowner

Homeowners insurance is a required cost of owning a home, but you don't have to overpay. First-time buyers have several ways to lower their premiums without reducing coverage. Here are five strategies that can help keep home insurance affordable:

1
Bundle Home and Auto Policies
Most insurers offer a discount when you bundle homeowners and auto insurance with the same company. Bundling saves 5% to 20% on your homeowners premium depending on the insurer.
2
Raise Your Deductible
Increasing your deductible from $1,000 to $2,500 can lower your premium by 10% to 20%. Make sure you can afford the higher out-of-pocket cost if you need to file a claim.
3
Improve Your Home's Safety Features
Installing smoke detectors, deadbolts, a security system or storm shutters can qualify you for discounts. Some insurers offer 5% to 15% off for homes with monitored security systems.
4
Maintain Good Credit
Insurers in most states use your credit-based insurance score to set your rate. Paying bills on time and keeping credit balances low can help lower your premium over time.
5
Shop Around Before Renewing
Compare quotes from at least three insurers each year before your policy renews. Rates change annually, and the cheapest option last year may not be the cheapest this year.

When Should You Buy Homeowners Insurance?

Most mortgage lenders require proof of homeowners insurance before they'll close on your loan. Aim to purchase your policy at least two weeks before your closing date to allow time for your lender to review and approve the coverage. Cash buyers aren't required to carry homeowners insurance, but going without it leaves your home unprotected against fire, theft and weather damage. Check with your lender early, as insurance requirements and documentation timelines can vary.

First-Time Home Insurance: Bottom Line

Every first-time home buyer needs homeowners insurance before closing on a mortgage. Your policy covers dwelling damage, personal property losses, liability claims and temporary living expenses after a covered event. Rates depend on your location, home condition, credit-based insurance score and coverage choices. Compare multiple quotes, ask about available discounts and buy your policy at least two weeks before closing to avoid delays.

First-Time Home Buyer Home Insurance: FAQ

We answer common questions first-time home buyers ask about homeowners insurance.

Is homeowners insurance required by law?

No state requires homeowners insurance by law. But your mortgage lender will require an active policy before closing, so it's effectively mandatory for financed homes.

When should I start shopping for homeowners insurance?

Start as soon as your home offer is accepted. Aim to have your policy in place at least two weeks before closing.

Does homeowners insurance cover my personal belongings?

Yes, the personal property portion of your policy covers belongings like furniture, clothing and electronics. High-value items like jewelry or art may need a scheduled personal property endorsement for full coverage.

What's a deductible in homeowners insurance?

Your deductible is the amount you pay out of pocket before your insurer covers the rest of a claim. Higher deductibles lower your premium, but increase your cost when you file a claim.

Are there discounts for first-time home buyers?

Some insurers offer new-home discounts, especially for recently built or new construction homes with updated systems. Bundling auto and home insurance, installing safety features and maintaining good credit can also lower your rate.

First-Time Buyer Home Insurance Rates: Our Methodology

MoneyGeek analyzed premium data from Quadrant Information Services across all 50 states and scored each insurer on affordability, customer service, financial stability, coverage options and discounts. We used J.D. Power satisfaction ratings, AM Best financial strength scores and coverage comparisons to identify the best companies for different homeowner needs. Rates shown are averages and your actual premium may differ.

Our rate comparison uses a sample homeowner ages 41 to 60 with good credit (769 to 792), no recent claims and standard risk on a wood-frame home built in 2000 with $250,000 replacement value. Base coverage is $250,000 dwelling, $125,000 personal property, $200,000 liability and a $1,000 deductible. Top picks were chosen based on competitive pricing, J.D. Power customer scores, AM Best ratings and the availability of add-on coverage options.

Home Insurance for New Homeowners: Related Articles

About Mark Fitzpatrick

Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. He has analyzed the insurance market for over five years, conducting original research for insurance shoppers. His insights have been featured in CNBC, NBC News and Mashable.

Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!

He writes about economics and insurance, breaking down complex topics so people know what they're buying.

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