Homeowners Insurance for First-Time Buyers

Buying a home for the first time is an exciting milestone. But it also requires a significant financial investment, making home insurance important.

A home insurance policy usually includes dwelling, other structures, personal liability, and loss of use coverage. It’s designed to protect your home and belongings from unexpected events like a fire, hailstorm, or burglary.^[1] Your mortgage lender might also require coverage before you close on your property. 

Here’s what you should know about buying home insurance as a first-time homebuyer, how much it costs, common mistakes to avoid, and ways to save on your home insurance policy.

How to buy homeowners insurance as a first-time buyer

To protect your investment, it’s generally a smart move to start looking for homeowners insurance right after the seller accepts your offer. If you decide to take out a mortgage, your lender may also ask for proof of coverage before the closing.

Follow these steps to lock in a home insurance policy as a first-time buyer: 

• 

  Gather property information

  Use the home inspection and appraisal reports to collect important details about the home you’re considering. Jot down its age, market value, square footage, roof type, wiring, style, and note if there’s a garage.

• 

  Understand lender requirements

  Ask your mortgage lender how much home insurance you’ll need. This way, you can ensure you buy enough coverage to satisfy your loan.

• 

  Shop around

  Request homeowners insurance quotes from at least three different home insurance companies. An insurance agent can help you understand how much coverage you may need. Be sure to ask about discounts, types of coverage, and policy exclusions.

• 

  Compare quotes

  Carefully review each insurer’s rates, coverage options, exclusions, and deductibles. If anything is unclear, reach out to an insurance agent or home insurance company directly for an explanation.

• 

  Choose a home insurer

  Decide on a home insurance company and finalize your policy. Then, use the declarations page to send proof of coverage to your lender before closing.

How home insurance works when paying through escrow

An escrow account is a reserve account set up by your mortgage lender. It can help you budget for annual costs as a first-time homebuyer, such as homeowners insurance coverage, private mortgage insurance, and property taxes.

If you decide to pay your homeowners insurance through an escrow account, your lender will estimate your annual premium and divide it across your monthly mortgage payments. Each time you make a monthly payment, the lender sets aside a portion of the payment into an escrow account and later uses these funds to pay your insurance premiums.

Your lender may require you to cover your home insurance costs through escrow if you put less than 20% down or took out an FHA loan. Otherwise, you can usually pay your home insurer directly, often on a quarterly or annual basis.

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What homeowners insurance covers for first-time buyers

Home insurance is made up of several core coverages, including dwelling, other structures, personal property, liability, and loss of use coverage. If you’re buying your first home in a high-risk area, you may also want to add endorsements such as flood insurance or earthquake insurance.

When buying your homeowners policy, you can choose between replacement cost coverage and actual cash value (ACV) coverage. Replacement cost insurance pays out the actual cost to repair or replace your home. An ACV policy, on the other hand, covers the cost of repairs or replacement, minus depreciation. 

Check out the table below to learn more about common homeowners coverage options:

Coverage Type	What It Protects	Coverage Limits	Deductibles
Dwelling coverage	Your home’s physical structure	$200,000, $300,000, $400,000, $500,000, and higher	$1,000, $1,500, $2,000, $2,500, and $5,000
Other structures	Structures on your property that aren’t directly attached to your home, such as sheds or fences	10% of dwelling coverage	Same as dwelling coverage
Personal property coverage	Personal belongings inside of your home like clothing and furniture, plus some types of property stored off site	50%–70% of dwelling coverage	Same as dwelling coverage
Liability coverage	Damages owed to third parties that you’re legally reponsible for	$100,000 is typical, but higher limits are usually available	No deductible
Loss of use	Relocation and cost-of-living expenses if you can’t live in your home temporarily due to a covered peril	10%–30% of dwelling coverage	Deductible doesn’t apply in most cases

How much home insurance costs for first-time buyers

The national average cost of home insurance is $234 per month, according to Insurify data.

But factors like your home’s age, location, and building materials determine your premium. Your chosen coverage limits and deductibles, your credit history, and eligible discounts also affect your premium.^[2] To save on your homeowners coverage, look for first-time homebuyer discounts and compare multiple home insurance quotes.

Here’s a look at some of the cheapest home insurance companies for first-time buyers, according to our research.

The below national rates are estimated rates current as of: Wednesday, September 30 at 5:00 PM PDT. 

Data reviewed by Chase Gardner

Chase GardnerData Insights Manager

• Data expert on auto trends and driver behavior

• University of Chicago graduate with statistics degree

Chase spearheads analytics for Insurify’s data insights team. With his deep expertise in insurance data, Chase is often interviewed on industry trends.

Featured in

Insurance Company	Average Annual Rate: With $300,000 in Dwelling Coverage
Amica	$1,548
USAA	$1,980
American Family	$2,148
Mercury	$2,436
Allstate	$2,448
Travelers	$2,460
Farmers	$2,712
State Farm	$2,760
Auto-Owners	$3,000
Nationwide	$3,276

Cost of home insurance for first-time buyers by state 

Your location, down to your ZIP code, affects the cost of home insurance. Insurance companies also use local factors — like construction costs, weather risks, and your home’s proximity to a fire station — when calculating rates.

Check out the table below to see average home insurance costs for first-time homebuyers by state.

The below national rates are estimated rates current as of: Wednesday, September 30 at 5:00 PM PDT. 

Data reviewed by Chase Gardner

Chase GardnerData Insights Manager

• Data expert on auto trends and driver behavior

• University of Chicago graduate with statistics degree

Chase spearheads analytics for Insurify’s data insights team. With his deep expertise in insurance data, Chase is often interviewed on industry trends.

Featured in

State	Average Annual Rate: With $300,000 in Dwelling Coverage
Vermont	$984
New Hampshire	$1,188
Maine	$1,200
Washington D.C.	$1,200
New Jersey	$1,224
Delaware	$1,272
Pennsylvania	$1,272
Nevada	$1,308
Alaska	$1,320
Oregon	$1,320
New York	$1,356
Washington	$1,404
Hawaii	$1,488
Wisconsin	$1,512
Utah	$1,524
West Virginia	$1,536
Virginia	$1,656
Wyoming	$1,704
Ohio	$1,716
Idaho	$1,728
Maryland	$1,944
Massachusetts	$1,956
Connecticut	$1,980
California	$2,040
Arizona	$2,184
Indiana	$2,220
Michigan	$2,256
Rhode Island	$2,364
Georgia	$2,496
Iowa	$2,508
Illinois	$2,568
Montana	$2,664
North Dakota	$2,664
Minnesota	$2,676
South Carolina	$2,700
South Dakota	$2,736
Missouri	$2,904
Tennessee	$3,096
North Carolina	$3,192
Colorado	$3,240
Kentucky	$3,252
New Mexico	$3,264
Mississippi	$3,348
Alabama	$3,408
Arkansas	$3,552
Kansas	$3,996
Nebraska	$4,044
Texas	$4,668
Louisiana	$5,028
Oklahoma	$5,556
Florida	$6,408

Disclaimer: Table data sourced from real-time quotes from Insurify's 500+ partner insurance providers and quote estimates from Quadrant Information Services. Actual quotes may vary based on the policy buyer's unique driver profile.

Common mistakes first-time buyers make with home insurance

If you’re buying your first home, keep these common pitfalls in mind to avoid financial losses and unnecessary headaches down the road:

• Not buying enough coverage: Per the 80/20 rule, it’s a good idea to insure at least 80% of your home’s total replacement cost. Assess your coverage needs to determine how much financial protection makes sense, or you could be on the hook for thousands if you don’t have enough coverage.

• Forgetting flood or earthquake insurance: Standard home insurance policies don’t cover flood and earthquake-related property damage. If you live in a high-risk area, consider separate flood insurance or earthquake insurance for added protection.

• Choosing the lowest premium: The lowest home insurance rate isn’t always the best option. If you decide on a policy because it’s the cheapest, your payout might not cover the full cost of repairs or replacement. You might also face coverage gaps that can cost you thousands of dollars out of pocket.

• Not checking company reputation: Cost is only one factor to consider when you shop for property insurance. If you find cheap coverage but the insurer isn’t reputable, they may not be able to pay out your claims. Do your research and read customer reviews to gauge a company’s reputation.

• Choosing an unaffordable deductible: A higher deductible can lower your premiums. But if you can’t afford to pay out of pocket in the event of an insurance claim, the up front savings won’t be worth it. Choose a deductible amount that’s realistic for your budget and lifestyle.

How to choose the best homeowners insurance policy for your first home

The best home insurance company depends on your unique situation. So it’s important to consider the full picture before you commit to a policy. As you shop around, be sure to compare these factors:

• Coverage types and limits: Decide whether you want a standard policy or need additional coverage, like flood or earthquake insurance. It’s also important to know how much coverage is needed for adequate protection.

• Deductible options: You may prefer a higher deductible in exchange for lower premiums. Or you might be better off with a lower deductible so you don’t have to spend as much out of pocket every time you file a claim.

• Rates: Home insurance premiums and discounts vary significantly by insurance company. That’s why it’s wise to compare home insurance quotes from several insurers. You can work with a home insurance agent or request quotes online.

• Customer service and claims process: Prioritize reputable home insurance companies with positive reviews and high customer satisfaction ratings. Also, look for insurers with a fast, convenient claims process and few consumer complaints about service or claims handling.

• Reviews and third-party ratings: Visit third-party review sites like Trustpilot and the Better Business Bureau (BBB) to gauge how current and former customers perceive a home insurer. Don’t forget to look at ratings from reputable organizations, such as J.D. Power.

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Tips for saving money on first-time homebuyer insurance

You can use a number of strategies to save on your first-time homebuyer insurance, including:^[3] 

• Bundle home and auto insurance. If you buy your home and car insurance policies from the same company, you might qualify for a bundling discount.

• Increase your deductible. A higher deductible can result in cheaper home insurance rates. Just make sure you can afford the higher out-of-pocket costs after a claim.

• Install home security systems and smoke detectors. Some homeowners insurance companies offer discounts for homes with security systems and smoke detectors. Before you invest in these updates, make sure you qualify for a discount.

• Ask about new-home discounts. Depending on the home insurance company, you might be eligible for a new homeowner, new construction, or similar home insurance discount.

First-time homebuyer insurance FAQs