First-Time Homebuyers Guide to Home Insurance

If you are like most, your home is your singular largest financial investment and is an immensely important purchase. In addition, if this purchase of a home happens to be your first, that makes it even that much more significant. Therefore, it’s imperative that as a new homeowner or soon-to-be homeowner you should educate yourself on how to protect this investment to the best of your ability with homeowners insurance. The following information is a helpful guide for first-time homebuyers, teaching you everything you need to know about homeowner’s insurance: 

What Does Home Insurance Cover?

The homeowner policy is a “package policy” consisting of six lines of coverage. The coverage includes the Dwelling, Other Structures (any detached building), Personal Property (covered anywhere in the world), Loss of Use (coverage to pay added expenses if your home is no longer habitable due to a covered loss), Medical Payments, and Personal Liability coverage. You can also opt to buy additional coverages to protect against flooding or earthquakes as most standard policies don’t include these protections. Basically, this insurance will payout to you if your home is damaged through a natural disaster fire, wind, hail, lightning, or another type of accident. 

What Affects The Cost of Home Insurance?

The following are some common factors that could alter the cost of your home insurance policy:

  • Location: Your home’s location is one of the biggest factors that insurers use to determine homeowners' insurance premiums. If you live in an area that is prone to natural disasters like tornadoes (Like we often find in the Midwest), hurricanes, or wildfires, or if your home is located more than 5 miles from a fire department, you will pay more for homeowners insurance since the risk of insuring your home is higher. 

  • Home Value: The way homeowners insurance rates are tabulated is based on the cost of replacing or repairing your home. Therefore, it only makes sense that the more expensive your home is—the greater the home value—the more you will have to spend to insure that property. Obviously, the rates to cover a home that is valued at $200,000 will vary greatly than the rates to cover a home valued at $600,000.

  • Personal Information: You might be surprised to learn that your personal information, like your marital status and your credit rating, can have a pretty significant impact on how much you pay for a homeowner's policy.

  • Claims History: If you have ever filed a claim, cashing in on an insurance policy before, then you might have to pay a bit more for homeowners insurance. This is true even if your claim was from a renter's insurance policy or something similar. Anytime you have a history of filing claims, even valid ones, can put you in a higher risk category for new policies.

  • Home Security and Safety Features: If your home has a burglar and fire alarm system that is centrally monitored, your homeowner policy will qualify for a discount. The average discount would be around 10% of the annual homeowner premium. Most insurance companies do not offer discounts if the home only has cameras and/or a Ring doorbell system. The reason for this is that these types of systems do not help if there was a fire in the home.

How to Get The Best First-Time Homeowners Insurance Rates

There are several ways to reduce your overall cost of homeowners insurance rates, just a few of which are listed below:

  • Compare Quotes: Get in contact with several insurance companies to find the best rates.

  • Take Advantage of Other Insurance Policies: If you have purchased renters insurance policies or auto insurance, consider that same company for your homeowner’s insurance, giving you the ability to bundle policies and enjoy multi-policy discounts. 

  • Work on Your Credit: As mentioned above, your financial health and credit history will alter the amount you have to pay for insurance cover. Therefore, if your credit history is less than stellar, work on improving it as quickly as possible. 

  • Don’t File Unnecessary Claims: Don’t be too quick to file unnecessary claims as too many can negatively impact your insurance rates. If damages are minor and within your budget, you are likely better off covering the cost yourself and not filing a claim, saving that for only absolutely necessary damages that are too expensive to cover yourself.  

Homeowners Insurance a Smart Purchase

Homeowners insurance is not required by law, but if you have a mortgage or any other type of home loan, you will likely be required to purchase and maintain a homeowner’s insurance policy. Of course, it’s a wise choice even if not legally required as it can help you avoid almost certain financial devastation if something happens to your home. Contact our team to find the right policy to meet your specific needs. Our team of professionals will be happy to walk you through the process!


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