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Guide to Buying Home Insurance for the First Time

Posted on August 6, 2020

You’re a first-time homebuyer, and you’ve searched for the perfect house for months. You may even have a picture in your mind of your dream home.  You find the perfect home.  You make an offer.  It’s accepted.  And now you must learn about a topic that might not be as fun as home-shopping, but it’s important — home insurance.

Your mortgage lender will likely require you to carry some level of home insurance. Don’t rely on the most basic coverage. Make sure that your home insurance protects you from financial disaster. After all, this was a huge investment.  Likely your most expensive purchase to date.

If you’re buying your first home, hopefully you have experience with condo or renter’s insurance. There are similarities with home insurance, such as personal property coverage, but there’s a lot more to home insurance. That’s because there is a lot more to insure when you own a home.

In this guide, we will take you through what home insurance covers and give you tips, so you’re a home insurance expert. By the end of this short read, you should be more confident about buying your first home insurance policy.

When to get homeowners insurance when buying a new house?

Since most mortgage lenders require home insurance, you will need to have insurance secured before the mortgage closing. However, we recommend that you begin shopping for new home insurance as soon as you sign a contract.

After you’ve signed the contract, you will have some number of days before closing. This gives you time to research home insurance providers, get some quotes, and select the right policy for your needs before the closing day. Your new home insurance provider will supply you with proof of insurance, that you will provide the mortgage lender before closing.

How much home insurance do I need?

This requires thinking about the worst-case scenario. As difficult as it is to do, imagine that your new home is destroyed, and you are faced with rebuilding the home and replacing your belongings. These are the costs you are insuring.

Dwelling coverage: Your new homeowners insurance policy’s dwelling coverage amount needs to be as close as possible to what it would cost to rebuild the home or the homes replacement value. Your broker will be able to help you determine this based on a calculator or after asking you a few simple questions about your new home. Most insurance brokers use software to determine the replacement cost. The software allows them to enter your home’s features and calculate the cost of replacement. Also, most policies include coverage for up to 125% of the replacement cost.

Personal property coverage: This coverage amount should be between 50% and 70% of the dwelling coverage. But, if you have an engagement ring, a customized computer, an expensive set of golf clubs, or even a signed Gretzky rookie card you should consider purchasing an additional personal articles policy. These add-ons to your home insurance are typically inexpensive (we’re talking a few dollars every month) but will protect those important items that would be costly to replace.

Liability coverage: Most homeowners policies include $100,000 worth of liability coverage, but up to $500,000 could be recommended, depending on your situation.

Additional Living Expense coverage: ALE coverage should be about 20% of the home’s replacement value.

How much is home insurance?

As a future new homeowner, the costs associated with buying a new home are probably at the top of your mind. Included in those costs is the cost for home insurance.

It is important to understand the difference between a deductible and a premium. Think of a premium as the amount of money you pay the insurance company to provide your home insurance policy. The premium is owed by you to the insurance company each year to maintain the policy.  The deductible is what you must pay initially when your insurance company approves your claim. It’s your share of the repair cost.

The cost (premium) of home insurance depends on many different factors including the where the home is located, the value, the age and condition of the home, and discounts you may qualify for among several variables.

Choose a home insurance deductible.

The deductible, unlike the premium, is only payable by you when your claim is approved. Remember, the deductible is your share of a repair cost. There is an inverse relationship between the home insurance premium and deductible. The higher the deductible, the lower the insurance premium. If you have a $500 deductible, you’re going to pay more on your premiums than if you have a $2,000 deductible. Going with a higher deductible will save you money. It will also reduce your home insurance claims.

Home insurance discounts.

Home insurance companies provide dozens of discounts, and you may qualify for many of them. Some of the most common discounts are:

  • Bundling (also called multi-policy)
  • Loyalty
  • Claims-free
  • Security system
  • Automatic payment

Ask your insurance broker about the discounts for which you may be entitled.

Find out what your policy doesn’t cover.

Read the exclusions section of your home insurance policy. Understanding what the insurance won’t cover is just as important as knowing what the insurance will cover – before you make a claim.

Shopping for home insurance.

You’ve just signed a contract to buy your future home. You now know more about home insurance.  It’s time to start shopping.  Call an insurance broker.  They can shop the market and get you the best rate available.

Many home insurance companies have online quoting tools on their websites to help you begin the quoting process (visit www.munninsurance.com to see ours). If you prefer a more one-on-one approach, most brokers have people readily available via phone to help you through the process.

Once you’ve collected the quotes, do a side-by-side comparison of premiums, deductibles, and coverage levels. If things are not clear, don’t hesitate to ask the insurance company for clarification before you proceed. Your broker can help with this.


Now, it is time to select the right insurance policy for your home. Once you’ve signed the new home insurance policy, you can enjoy your new home with the peace of mind of knowing you have great coverage at an affordable price.

If you would like more information on getting home insurance for the first time, or if you have any questions on your home or auto insurance, please contact Munn Insurance toll free at 1-855-726-8627 today.

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