8 Insurance Tips for First-Time Home Buyers

Buying your first home is exciting—but it also comes with a long to-do list. Between securing a mortgage, covering upfront costs, updating your address, and shopping for furniture, it’s easy to overlook something just as important: homeowners insurance for first-time home buyers.

Homeowners insurance protects not only the structure of your house but also the belongings inside it. It can even cover legal expenses if someone is injured on your property and decides to sue. While not legally required, most mortgage lenders mandate it.

Without homeowners insurance, you’d be on the hook for the cost of major damage or loss caused by fire, storms, theft, or vandalism. In fact, property damage is the most common reason for homeowners claims—in 2022, it accounted for 97.8% of all claims, with wind/hail, water damage/freezing, and fire/lightning topping the list.

If you’re preparing to buy your first home, here are eight key tips to help you navigate homeowners insurance with confidence.

1. Understand What Your Policy Includes

A standard homeowners policy usually has four main components: dwelling coverage, personal property coverage, liability protection, and additional living expenses.

• Dwelling coverage pays for repairs or rebuilding if your home is damaged by fire, wind, hail, lightning, or vandalism. It typically includes attached structures like garages and decks.
• Personal property coverage protects belongings such as clothing, jewelry, furniture, and electronics. Review your policy limits to make sure your most valuable items are covered—you may need additional riders for high-value jewelry or artwork.
• Liability protection covers legal fees if someone is injured on your property or if your pets cause injury or damage.
• Additional living expenses (ALE) help pay for hotels, meals, and necessities if your home becomes uninhabitable due to a covered loss.

Just as important, know what’s not covered. Standard policies typically exclude flood and earthquake damage, as well as routine maintenance issues. If you live in a flood-prone area, you’ll likely need separate flood insurance.

Pro tip: Stay proactive with seasonal home maintenance to help prevent costly claims.

2. Pick Your Insurer—Don’t Leave It to the Lender

If you’re financing your home, your lender may pay your insurance premiums through an escrow account. But that doesn’t mean you should let them choose the insurer for you. Lender-placed insurance (LPI) is often much more expensive.

Instead, shop around for a policy yourself—ideally with the help of an agent. When comparing providers, look at customer satisfaction ratings, claims reviews, and the company’s financial strength.

You can also save money by bundling home insurance with auto or life insurance.

3. Coverage Cost Doesn’t Equal Purchase Price

Your homeowners coverage amount won’t necessarily match what you paid for your home. Dwelling coverage is based on the cost to rebuild your home, which factors in construction materials, labor, and compliance with current building codes—not market price.

Older homes can be especially expensive to rebuild, so it’s important to discuss coverage limits with your agent. Make sure you have enough protection without paying for unnecessary extras.

4. Know the Difference Between ACV and RCV

When it comes to payouts, there are two main types of coverage:

• Actual Cash Value (ACV): Covers the cost to repair or replace property, minus depreciation. This means you’ll get less than the cost of buying the same item new. It’s cheaper but offers less protection.
• Replacement Cost Value (RCV): Covers the full cost to repair or replace at today’s prices. It’s more expensive but provides stronger protection.

Talk with your agent to decide which option makes the most sense for your budget and needs.

5. You Might Need Private Mortgage Insurance

If your down payment is less than 20%, your lender may require private mortgage insurance (PMI). PMI protects the lender, not you, but it may help you qualify for a loan.

The good news? PMI can usually be canceled once you’ve built enough equity in your home.

6. Create a Home Inventory

A home inventory makes the claims process much easier if you ever need to file one. Document valuables like furniture, jewelry, and electronics with item names, descriptions, receipts, and photos.

In fact, a 2023 study found that nearly half of homeowners had prepared an inventory to help document losses for insurers.

7. Consider How You’ll Use Your Home

Certain lifestyle choices can increase risks and affect your premiums. Examples include installing a pool, adopting pets, or frequently hosting large gatherings.

Always notify your insurer about changes like these and be prepared for possible premium adjustments.

8. Earn Discounts Through Smart Upgrades

Home improvements that make your property safer can reduce your insurance costs. Upgrades such as:

• Leak detection systems
• Electrical monitoring systems
• Burglar alarms
• Storm shutters
• Impact-resistant windows
• Locked pool gates

Check with your agent to learn which upgrades could qualify you for discounts.

Buying your first home is a big milestone, and homeowners insurance is a critical part of protecting that investment. It may not be the most exciting item on your checklist, but it’s one of the most important.

At C&S, we’re here to guide you through the process. Speak with one of our agents today to make sure your first home has the protection it deserves.