First-time home buyers insurance

The best homeowners insurance for first-time homebuyers

No single company will always offer the best insurance for first-time buyers. The best company for your needs will be determined in part by your priorities. You may be looking for the cheapest possible coverage, for example, or maybe you prefer a company with robust digital tools so you can manage your account online or a company with a good assortment of coverage options or discounts.

To help you find the best insurer for your home, we took a close look at the major carriers and assigned each a Bankrate Score, from 0.0 to 5.0. We looked at factors including average rates, available coverage options and discounts, financial stability and more to determine the companies that offer the best experience for their policyholders. Based on our analysis, the following insurers may be worth considering.

What do first-time homebuyers need to know about home insurance?

Homeowners insurance is designed to safeguard against financial peril associated with your home. In short, these policies help reduce the risk of out-of-pocket costs that result from covered damages to your home or property. The specifics vary between policies, but they all function by insuring your properties against specific, listed perils detailed within the policy. Most policies will also include a list of specific exclusions. 

Most first-time home buyers insurance policies will be HO-3 policies — considered standard home insurance. A homeowners insurance policy can be broken down into several coverage categories, including the following:

• Dwelling coverage: A homeowners insurance policy covers the structure of your home and any other attached buildings, like a garage or porch.
• Other structures coverage: This portion covers various structures on your property, such as a detached shed, garage or fence.
• Personal property coverage: This section of your HO-3 policy will provide coverage if your personal property, like clothing or furniture, is destroyed by a covered peril.
• Liability coverage: This provides personal liability coverage if someone hurts themselves on your property and sues you for damages. This coverage can also help pay your legal fees.
• Medical payments coverage: Medical payments coverage will pay for another person’s medical bills if they injure themselves in your home or on your property, even if you aren't liable for the incident.
• Additional living expenses coverage: If your house is uninhabitable due to a covered peril, additional living expenses can help pay for your hotel room, food and other expenses while your home undergoes repairs.

Even the best home insurance for first-time home buyers will have exclusions. For instance, an HO-3 will not cover damage caused by earthquakes, floods or sewer backup. Beyond exclusions, knowing where home insurance ends and other services begin is important. For instance, although home insurance is not for general wear and tear, home warranty services and products generally are.

For first-time home buyers, insurance agents can be a valuable resource. Consulting with a licensed insurance agent can help you determine what isn’t covered in your policy and your risks for each exclusion. Learning more about your policy in-depth can help you decide what supplemental policies may be best for you.

Learn more: What does homeowners insurance cover?

The cost of first-time homeowners insurance

The average cost of homeowners insurance is $2,329 per year for $300,000 in dwelling coverage, according to Bankrate’s analysis of rate data from Quadrant Information Services. However, the cost of your own policy will vary based on your personal details and home characteristics. Here are a few factors that go into determining how much you pay for first home buyer insurance:

• Location: The state you live in plays an enormous role in the cost of homeowners insurance. For example, the average policy costs $4,623 per year in Oklahoma but just $1,370 annually in Idaho. Your city, town and ZIP code can also affect your premium. For example, you might pay less if you live close to safety features like fire hydrants, fire departments and police stations.
• Home value: A $200,000 home will be cheaper to insure than a $600,000 home because the replacement value is much lower. As a general rule, the more expensive your home is, the more expensive your insurance will be. Note that this refers to the cost to rebuild your home back to its current condition based on labor and materials in your area.
• Deductible: Your deductible is the amount you pay out of pocket if you file a claim on your policy. If you are willing to have a higher deductible, you will likely pay less in premiums since you are willing to pay more if you file a claim. Generally, the higher your deductible, the lower your rate.
• Claims history: If you have filed a claim on a prior property insurance policy, like a renters insurance policy, that may affect the price of your homeowners insurance.
• Coverage types: Choosing higher coverage limits and adding additional coverage to your standard home insurance policy will typically increase your premium.
• Personal information: Some personal information, like your credit-based insurance score, age and marital status, may affect how much you pay for your insurance in most states.

The best way to determine the cost of your first home insurance policy is to get quotes from several insurance providers. This can help you compare each company’s coverage options, discounts and prices.

When to buy first home insurance

If you purchase your home with a mortgage, you'll likely be required to purchase home insurance along with it. That’s because most mortgage lenders require home insurance as a stipulation of the loan. In this most common scenario, the closing date on the property and the effective start date on the home insurance policy are the same. If, for some reason, you cannot line up the policy start date, the closing date will generally be moved back to accommodate the need for home insurance to be active from the first day you own the home.

How much first-time homeowners insurance do you need?

When getting property insurance quotes, your insurer will review the home’s characteristics and help you determine the estimated cost to rebuild the home should a claim occur. These characteristics must be as accurate as possible when determining this calculation. Each insurer has its own algorithms for determining your rebuild cost, so if you obtain quotes from multiple insurers, you will likely see your estimated dwelling coverage amount fluctuate.

Keep in mind that your estimated rebuild amount, or replacement cost, is different from the market value of your home. Even if your home is a total loss, the land is still there and holds value. Land is also not covered by a home policy. Only the home and structures on the land are covered by your policy. You may also want to avoid reducing your dwelling amount too much from what the property insurer calculated, or that could create a risk of your home lender not proceeding with your loan. This could also create a coverage shortfall if you suffer a catastrophic loss to your home.

However, in addition to the minimum coverage required by your lender, you may want to consider purchasing additional dwelling coverage, optional endorsements or increased liability coverage to provide more financial protection.

To help decide how much homeowners insurance you need as a first-time buyer, you may want to:

• Research local building costs to see how much it would cost to replace the home: Some areas of the country have higher costs for materials and labor that could impact how much it would cost to repair or rebuild your home. Knowing these costs come in handy, and you don’t have to do this research on your own; insurers and agents use sophisticated replacement cost valuation tools to determine the specific dwelling coverage value of your home. With the purchase of an existing home, it can also be helpful to reference pictures on real estate sites when discussing property details with an insurance agent. The insurance agent may want to review the pictures as well.
• With purchasing a home, check to see that local building codes are met: If not, you may need to add ordinance or law coverage to your policy to protect your finances against the costs of bringing your home up to code after a covered claim. If your home has outdated infrastructure, like knob and tube electrical wiring, it can affect which property insurers are willing to insure the home. With a new home, the realtor or project manager may also have details that are helpful in generating an accurate insurance quote. A new home inspection report or appraisal may be a good reference as well.
• Take inventory of the furniture and belongings you intend to move into the home: You do not need to figure out the exact value of your belongings — your personal property coverage typically defaults to between 50 and 75 percent of your dwelling coverage amount. But having a rough estimate of your personal property may help you decide whether you need to add more personal property coverage to adequately insure your belongings in case of a total loss, like the losses that can occur from a fire or tornado.
• Think about your liability exposure: If you have a pool, trampoline, playset, pets or have guests in your house often, you may want to increase your liability coverage. This coverage helps financially protect you from the medical and legal costs associated with injuries or damage to the property of others in which you are found negligent. Keep in mind that your new home is a huge financial asset, so it’s worth considering making sure your liability coverage is sufficient enough to cover your new property and any other assets in your name.
• Estimate your local living costs if your home became temporarily uninhabitable: Most home insurance policies cover additional living expenses that occur during a covered claim for 10 to 20 percent of the replacement cost value, but knowing what costs you might incur if your home is temporarily uninhabitable could help you decide if more coverage is necessary.

While this might seem overwhelming, a licensed insurance agent can walk you through each step. Insurance companies have tools to help determine how much your home would cost to rebuild and can help you decide what additional coverages and levels are right for your situation.

How to get the best first-time homeowners insurance rate

There are many important factors to consider when selecting a home insurance company, including cost. Thankfully, you can use various strategies to help you identify and pursue affordable home insurance plans.

1. The first step is to shop around and compare different home insurance carriers to see which will offer you the coverage you want at the most competitive rate. Getting quotes from several companies can help you find a more competitive rate for your home insurance. Every company has different rates, and prices can vary greatly. Each insurance provider will weigh your rating factors differently. For example, if you have a prior claim, you may find that one company surcharges the claim much more heavily than another.
2. It’s also essential to note critical details like your new home’s proximity to a fire hydrant and fire department or the storm and disaster protection features in your home, such as a fortified roof, as these can have a notable impact on rates.
3. From there, you can compare discount options available from the carriers with the best quotes to see how much lower you might be able to reduce your premium. For instance, buying your auto insurance from the same company as you buy your home insurance will often result in a multi-policy discount, which could save you money on both policies. Other typical homeowners insurance discounts include savings for new roofs, sprinkler systems, paperless policy statements and security systems.

How to keep your homeowners insurance rate low

Once you have signed up for a first-time home buyer’s insurance policy, you may notice your premium changing at your annual renewal. While insurance premiums will generally increase each year, this can happen for a few reasons. The price of labor and materials may have increased in your area, which can increase the amount of dwelling coverage you have. Or perhaps you filed a claim, which may raise your premium.

Additionally, insurance companies can file for across-the-board rate increases with a state insurance department. Even if nothing else has changed, the new rates might impact the cost of your policy. However, there are steps you can take to help keep your insurance premiums in check:

• Avoid filing claims unless necessary: Although your insurance is designed to protect your finances by reducing your out-of-pocket costs from a covered claim, filing too many claims can have a negative impact on your premiums. Knowing when to file a home insurance claim and when to pay out of pocket may help you save. If the cost of the damage is below, equal to or slightly above your deductible, you may be better off foregoing the claims process to avoid a rate hike.
• Keep your credit score high: Although some states prohibit using your credit history as a rating factor, most do look at your credit-based insurance score when rating your policy. A higher score generally means lower premiums.
• Stay with your insurer to take advantage of loyalty discounts: Shopping for a new carrier might help you find a lower premium, but you could also miss out on loyalty discounts if you change providers too often.
• Review your policy annually to see if any updates are needed: If you have updated your home or added safety measures, you may need to update your coverage or discounts.
• Invest in resilience upgrades: Mitigation measures, like storm shutters or a sprinkler system, can lower your premium and reduce claims by lessening the risk and severity of damage.

Licensed insurance professionals can help you choose appropriate coverage types and levels, as well as help you find discounts that could lower your premium. If you are unsure what kind of coverage to purchase, what options are best for you and what discounts you qualify for, working with an agent might be helpful.

Frequently asked questions