First-Time Homeowner's Insurance Guide: Everything You Need

Congratulations on buying your first home. Among the mountain of paperwork, mortgage details, and closing costs, home insurance might seem like just another checkbox to complete. But choosing the right policy now can save you thousands of dollars and enormous headaches later. Here's everything first-time homeowners need to know about home insurance in 2026.

See our full comparison at homebeehub.

When Do You Need Home Insurance?

Your lender requires home insurance before closing. No insurance, no mortgage. You'll need to provide proof of insurance (a declarations page or binder) at or before closing, and coverage must begin on your closing date.

Timeline: Start shopping for insurance 2-3 weeks before closing. This gives you time to compare quotes, ask questions, and avoid last-minute stress. Insurance companies can usually issue policies within 24-48 hours if needed, but don't wait until the day before closing.

What Does Home Insurance Actually Cover?

Standard homeowners policies (HO-3, the most common) include six coverage types:

Coverage A: Dwelling

Covers the structure of your home including walls, roof, built-in appliances, and attached structures. This is the most important coverage and what your lender cares most about.

How much: Should equal your home's rebuild cost, not market value. A $400,000 home might only cost $280,000 to rebuild. Your insurance company or agent can provide a rebuild cost estimate.

Coverage B: Other Structures

Covers detached structures like garages, sheds, fences, and gazebos. Typically 10% of your dwelling coverage automatically ($28,000 if dwelling is $280,000).

Coverage C: Personal Property

Covers your belongings: furniture, clothes, electronics, appliances, and everything else you own. Standard coverage is 50-70% of dwelling coverage.

Important: Special limits apply to jewelry, cash, and collectibles. A standard policy might only cover $1,500 in jewelry theft. Expensive items need separate riders.

Coverage D: Loss of Use

Pays for additional living expenses if your home becomes uninhabitable. Covers hotel bills, restaurant meals, and temporary housing costs. Typically 20% of dwelling coverage.

Coverage E: Personal Liability

Protects you if someone is injured on your property or you're found legally responsible for damage. Standard coverage: $100,000 to $500,000. Recommendation: Carry at least $300,000, ideally $500,000.

Coverage F: Medical Payments

Pays medical expenses for guests injured on your property, regardless of fault. Typically $1,000 to $5,000. Recommendation: Carry $5,000 to prevent small injuries from becoming lawsuits.

For detailed explanations, read our guide on what home insurance covers.

How Much Coverage Do You Need?

First-time homeowners often get this wrong. Here's the correct approach:

Dwelling Coverage (The Most Important)

Your dwelling coverage should equal rebuild cost, not market value or purchase price. In expensive markets like San Francisco or New York, market value often exceeds rebuild cost. Your $600,000 home might only cost $350,000 to rebuild.

Get a rebuild cost estimate from your insurer or use their online calculator. Factors affecting rebuild cost: Square footage, building materials, number of stories, custom features, local labor costs, and home age/style.

Personal Property Coverage

Start with 50% of dwelling coverage as a baseline. If you have $280,000 dwelling coverage, you'd have $140,000 in personal property coverage.

Adjust up if: You have expensive furniture, electronics, or collectibles, or you work from home with expensive equipment.

Adjust down if: Your home is newly purchased and sparsely furnished, or you prefer minimal possessions.

Liability Coverage

Minimum recommendation: $300,000

Better: $500,000

Best: $500,000 plus umbrella policy

The cost difference between $100,000 and $500,000 liability is only $40-80 per year. Always go higher. Learn more in our liability coverage guide.

How Much Does Home Insurance Cost?

National average in 2026: $1,428 per year or $119 per month. But your cost varies dramatically based on location, home value, deductible, and coverage levels.

Cost by State

Cheapest states: Hawaii ($480), Vermont ($780), Utah ($820), New Hampshire ($850)

Most expensive: Louisiana ($3,800), Florida ($3,600), Texas ($2,900), Oklahoma ($2,500)

State costs vary due to natural disaster risk. Hurricane, tornado, and flood-prone states have much higher rates.

Cost by Home Value

$200,000 home: $800-$1,200/year

$300,000 home: $1,200-$1,800/year

$500,000 home: $1,800-$2,800/year

$1,000,000 home: $3,500-$6,000/year

Choosing the Right Deductible

Your deductible is what you pay out-of-pocket before insurance kicks in. Common options: $500, $1,000, $2,500, and $5,000.

Higher deductible = lower premium. Going from $500 to $2,500 deductible typically saves $350-$500 per year.

Recommended for first-time homeowners: $1,000 to $2,500, depending on your emergency fund. Only choose $500 if you don't have $1,000+ in savings. Only choose $5,000 if you have a strong emergency fund ($10,000+).

For detailed guidance, see our article on choosing the right deductible.

Getting Your First Quote: Step-by-Step

Here's how to get accurate quotes:

Step 1: Gather Necessary Information

You'll need: Home address, purchase price, square footage, year built, roof age, heating/cooling system type, electrical system type, security features (alarm, cameras), and any recent updates.

Step 2: Get Quotes from Multiple Insurers

Get quotes from at least 3-4 companies. Rates vary by 20-30% for identical coverage. Compare:

National carriers: State Farm, Allstate, Liberty Mutual

Regional/specialty insurers: Farmers, USAA (military only)

Digital insurers: Lemonade

See our rankings of the best home insurance companies for 2026 to start comparing.

Step 3: Verify Identical Coverage

Make sure quotes include the same coverage levels. Check that: Dwelling coverage amounts match, deductibles are identical, liability limits are the same, and replacement cost coverage is included.

Step 4: Ask About Discounts

Common discounts you might qualify for: Bundle with auto insurance (15-25% off), new home (10-15% off homes under 10 years old), security system (10-20% off), new roof (5-15% off), smoke/fire alarms (5-10% off), and paid in full (3-8% off for annual payment).

Common First-Time Homeowner Mistakes

Mistake 1: Confusing Home Value with Rebuild Cost

Your $500,000 home might only cost $320,000 to rebuild. Don't insure based on purchase price. The land has value, but you don't insure land.

Mistake 2: Choosing the Cheapest Policy

The cheapest quote might include: Lower liability limits, actual cash value instead of replacement cost, higher deductibles, or fewer coverage options.

Always compare apples to apples. A $900 quote with $100,000 liability isn't better than a $1,100 quote with $500,000 liability.

Mistake 3: Not Reading the Policy

Know what's covered and what's not. Standard policies don't cover floods, earthquakes, or sewer backup. You need separate endorsements or policies for these.

Mistake 4: Forgetting to Insure Valuables

Jewelry, art, collectibles, and electronics have coverage limits (often $1,500 for jewelry, $2,500 for electronics). Add riders for expensive items.

Mistake 5: Setting Deductible Too High or Low

$500 deductible costs $300-400/year extra versus $2,500 deductible. If you never file claims, you waste that money. But $5,000 deductible is too high if you can't afford it in an emergency.

Read our full list of expensive home insurance mistakes to avoid.

What's Not Covered by Standard Policies

These common perils require additional coverage:

Floods: Need separate flood insurance ($400-$2,000+/year). Even non-flood zones should consider this.

Earthquakes: Need earthquake endorsement or separate policy. Critical in California, Pacific Northwest, and parts of the Midwest.

Sewer/drain backup: Often excluded, but you can add coverage for $50-100/year. Highly recommended.

Home business: If you run a business from home, you need business insurance. Homeowners policies exclude business-related claims.

Certain dog breeds: Some insurers exclude Pit Bulls, Rottweilers, and other breeds. Ask upfront if you have these dogs.

For more on flood coverage, see our article on flood insurance vs home insurance.

Money-Saving Tips for First-Time Buyers

Bundle with auto insurance: Single biggest discount, 15-25% off both policies. Can save $400-800/year.

Increase your deductible: Going from $500 to $1,500 saves $200-350/year. Make sure you have emergency savings first.

Improve home security: Installing monitored security system saves 10-20%, approximately $150-300/year.

Ask about all discounts: New home, new roof, claims-free, paid-in-full, and professional association discounts stack up.

Shop around every 2-3 years: Rates drift apart. People who shop around save $380/year on average.

For comprehensive savings strategies, read our guide on 10 ways to lower your home insurance premium.

Your First Year: What to Expect

Payment: Most homeowners pay through their mortgage escrow account. Your lender collects 1/12 of your annual premium each month and pays your insurance company directly.

Policy renewal: Your policy renews annually. Expect a renewal notice 30-45 days before. Review it carefully, rates and coverage can change.

Claims: Hopefully you won't file any, but if you need to, follow our step-by-step claims guide.