With dozens of insurers to choose from and several factors to consider depending on where you live, the task of choosing the right homeowners insurance policy can be daunting for first-time homebuyers. 

But experts say homeowners’ insurance is critical to have, since it can help provide a financial safety net if the unexpected occurs. Homeowners insurance policies generally cover any destruction and damage to a home’s interior or exterior, the loss or theft of possessions, and personal liability for any harm to others. 

Homeowners’ insurance is a good investment. Homeownership by nature is costly, so having an insurance policy for incidents helps protect your cash flow and keeps your funds freed up for future events that aren’t home-related.

The good news is that there are many different ways you might be able to customize your coverage based on the provider you choose and area you’re moving to. If you’re a first-time homebuyer and not sure where to start, here are some pointers on how to choose the best homeowners insurance policy for you.

The Cost of Homeowners Insurance for First-Time Homebuyers

Policy rates are determined by the insurer’s risk. Location, Age, Structure type, Roof type, Plumbing, electric and more all play into the risk factor when determining the policy premium.

The insurance company also assesses the risk based on past claim history associated with the property itself, its overall condition, and neighborhood. Home value plays a big role in determining your rate, too.

Tips to Save Money on Insurance as a First-Time Homebuyer

First-time homebuyers should always do a price comparison before buying homeowners insurance. Just about every insurer offers different discounts and options for premiums, so it’s worth spending a bit of extra time shopping around to find the policy that matches your budget, and your coverage needs. 

Tip 1: Shop Early for Homeowners Insurance 

As soon as you sign the contract and have an address to give to insurance providers, start looking for insurance and get at least three to five quotes. Don’t just go with the first insurance company you happen across or get referred to. Compare prices and coverages and look at company reviews to make sure you’re getting the best coverage for the best rate.

When you’re shopping, make sure you’re comparing the same types of policies from different insurers. Common form of homeowners insurance on a single family home is the HO-3 policy. It covers damage to your home and belongings from many different perils. A great way to start is by comparing the premiums for HO-3 policies to make sure you’re comparing apples to apples. Another is the HO6 policy. This covers the Walls-In and is most required when you are purchasing or refinancing a Condominium or Townhome. A DP3 is seen often with Investment Properties. Always be sure to check with your insurance agent first and explain the property type and occupancy type in which you are purchasing for so they can advise you on which policy is required. You want to be certain you are properly insured.

Tip 2: Determine the Right Amount of Coverage for Your Home

It’s critical to insure the home at its replacement cost, not market value. To figure out the right amount of coverage for your home, you’ll need to know how much it would cost you to repair the property. When  shopping for home insurance, your insurance company assess the property and its coverage needs by utilizing a Replacement Cost Estimator. All insurers have different formulas for estimates, and you’ll want to make sure yours is accurate. 

It’s also important to be aware of the 80% rule. Insurers will only cover the cost of a house’s damage if the owner has insurance cover equaling 80% or more of the house’s overall value. If your insurance coverage is less than 80%, you’ll be responsible for a portion of the damage costs.

Make sure your homeowners insurance covers at least 80% of the home’s value, but you should always strive for 100% coverage.

Tip 3: Know What Won’t Be Covered

Check for exclusions in policies. Many homeowners’ insurance policies list certain types of damage that they won’t cover, which often includes natural disasters like floods, mudslides, and earthquakes. If there are any exclusions that you would prefer to have on your policy, see if your insurance will add on additional coverage. Some types of insurance, like flood insurance, can be purchased separately. But try to never take a policy that excludes water or the roof. Hurricane Season is fast approaching.

Tip 4: Weigh How Much You’re Willing to Pay Out of Pocket

Ask your insurer whether the policy’s deductible is a fixed dollar amount or a percentage of the amount of your coverage. A deductible is the amount of money you’re responsible for when you file claims before the insurance company pays. You can lower your monthly premiums by increasing your deductible, but you’ll want to make sure you can come up with that amount or have it in an emergency fund in case there’s a claim. 

Also speak with your Mortgage Loan Advisor if you are financing your home. Some lenders will not allow you to take higher than a 5% deductible.

Tip 5: Consider Bundling Your Home and Auto Insurance

Bundling a home and auto policy can save you anywhere from 10% to 25%, depending on the insurance company. When shopping for home insurance, homeowners should compare individual versus bundled policies to determine which is more cost effective. Other home insurance discounts, such as having a security system or certain smart home upgrades, can also lower your premiums.  Please note, Florida is not a bundle state in which you receive credits for bundling, it is more for convenience to keep everything in one place.

The Bottom Line

You can never find insurance when it is too late. Preparation is key when becoming a homeowner. Start shopping early. To receive an accurate quote, make sure you provide a 4 point and wind mitigation inspection to your home insurance agent. They DO NOT need the Comprehensive report, only the 4 point or wind mitigation inspection. If you are unsure if you need a 4 point or wind mitigation inspection. Contact an Insurance Agent and they will let you know.