What Every Home Buyer Should Know About Insurance
Your mortgage lender will require homeowners insurance before closing — that much you probably know. But understanding what you're actually buying, what's excluded, and how to get the best rate can save you thousands over the life of your homeownership.
The average homeowners insurance premium is around $2,000 per year, but costs vary dramatically by location, home value, coverage level, and your personal risk profile. Getting it right means understanding the fundamentals before you start shopping.
Standard Coverage (HO-3 Policy)
Dwelling coverage: Pays to repair or rebuild your home's structure if damaged by covered perils like fire, wind, hail, or lightning.
Personal property: Covers your belongings (furniture, electronics, clothing) inside the home, typically at 50-70% of your dwelling coverage amount.
Liability protection: Covers legal costs and damages if someone is injured on your property. Standard is $100,000-$300,000, but consider higher limits.
Additional living expenses: Pays for temporary housing if your home becomes uninhabitable due to a covered event.
What's NOT Covered
Floods: Require a separate flood insurance policy through the National Flood Insurance Program (NFIP) or private insurers. Even if you're not in a flood zone, 25% of flood claims come from low-risk areas.
Earthquakes: Require a separate earthquake policy. Essential if you're in California, the Pacific Northwest, or other seismically active areas.
Maintenance issues: Gradual damage from neglect, wear and tear, pest infestations, and mold from ongoing moisture problems are your responsibility.
How to Shop Smart
Get quotes from at least 3-5 insurers. Compare identical coverage levels and deductibles, not just premiums. Ask about bundling discounts with auto insurance (saves 10-25%). Check each company's claims satisfaction rating and financial strength rating before choosing the cheapest option.
Money-Saving Strategies
- Raise your deductible: Going from $500 to $1,000 deductible can cut premiums by 15-25%
- Bundle policies: Combining home and auto with the same insurer saves 10-25% on average
- Install protective devices: Smoke detectors, burglar alarms, deadbolts, and water leak sensors often qualify for discounts
- Maintain good credit: In most states, insurers use credit-based insurance scores in pricing
- Review annually: Shop your policy every 2-3 years to ensure competitive pricing
- Ask about new roof discounts: A newer roof significantly reduces premiums, especially in hurricane-prone areas
Your Agent Can Help
An experienced real estate agent knows which insurance pitfalls are common in your area — whether it's flood zones, wildfire risk, or older homes with outdated systems that insurers penalize. Welcome Home Referrals connects you with knowledgeable local agents who guide you through every step of the buying process, including insurance.