Homeowners Insurance Basics Every First-Time Homebuyer Should Understand

Karin Carr, Owner
Published on October 3, 2022

The moment you enter your new house is an exciting turning point. However, the procedures necessary to get there—inspections, talks, and financial planning—can be taxing. Not to worry! You’ll soon open the door to your new house, spread packing peanuts all over the floor, quarrel over what you “forgot” to pack and fill it with wonderful memories. However, you’ll need to talk about getting homeowners insurance before getting your keys.

The terminology used in homeowner policies is frequently convoluted and challenging to understand. Since you’re not alone, it’s simple to get bogged down in the fine print, subscribe for whatever seems reasonable, and expect the best. A 2013 poll found that 53% of American homes have insufficient insurance, leaving the typical homeowner to pay for 27% of the costs associated with rebuilding. Many people will have to make sacrifices because of this, and their homes won’t be able to be rebuilt to their previous splendor.

In order to get a policy that satisfies your demands, it’s critical to comprehend the fundamentals of homeowners insurance. A typical policy offers coverage to guard you against the cost of a home, personal property, or liabilities loss. A fence or a detached garage are examples of additional constructions on your property that are covered by your insurance. Additionally, in the event that your house is rendered uninhabitable, Loss of Use will pay for additional expenses such as lodging, food, and transportation in order to maintain your current quality of life.

No problem, isn’t it? Now that you know the basics of what makes up a typical policy, keep these suggestions in mind while you shop for insurance for your new house.

Do your homework before making a purchase

Before buying a house, be aware of the hazards and what you’re getting into. The property’s Comprehensive Loss Underwriting Exchange (CLUE) report is a smart place to start. The claims and losses on the house during the previous seven years are listed in two CLUE reports. Additionally, do your homework on the area and consider factors like neighborhood criminal activity and the proximity to a fire station that may have an impact on your premium.

Understand the distinction between replacement cost and market value

Traditionally, the replacement cost of your house will serve as the basis for your insurance. The cost to rebuild your home using equivalent kind and quality materials are known as the replacement cost. Make sure this sum is sufficient to cover a complete loss. A market value policy only provides coverage for your home’s current cash value. Your home will almost certainly cost more to rebuild than its cash value, therefore a market value policy will only partially cover these costs.

Homeowners Insurance Basics Every First-Time Homebuyer Should Understand

Fill in the gaps in coverage

Every policy contains exclusions, so it’s crucial to fill up any coverage holes that might be impacted by your particular demands. For instance, conventional policies don’t often cover damages from floods, earthquakes, or backed-up sewers. If you foresee any of these problems, it could be a good idea to increase your insurance coverage.

You might also want to think about obtaining extended replacement cost insurance for your home or a liability umbrella policy. These more comprehensive insurance place a cap on the amount of protection you may get from a regular homeowners policy.


Typically, insurance firms provide a rebate on one coverage if you purchase several policies with them, such as a vehicle or life insurance. This strategy is known as bundling, and it may allow you to save money on your premium.

Keep informed

Every year, go over your policies. Improvements to your property and even the area can cause your premium to rise or fall. If you’ve added a completed basement or a swimming pool to your house, you’ll want to boost your policy so that you’re not underinsured in the event of a major property or liability loss.

However, if risks have been decreased, your premium may be reduced. Home improvements like a roof replacement, burglar alarm, fence, or pool cover can minimize risk and perhaps lower your premium.

Consult an expert

Consulting with an independent agent is the best approach to ascertain your coverage requirements. To offer the appropriate insurance for you, your agent will evaluate your circumstances, residence, and area. The specifics of your policy and any optional coverages you might want to add can also be explained by your representative.

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