The Top 7 Questions First-Time Homebuyers Have About Homeowners Insurance

The Top 7 Questions First-Time Homebuyers Have About Homeowners Insurance

TL;DR Homeowners insurance covers your costs in the event something goes wrong in your new home (e.g. fire, theft, accident). It’s the best way to protect your most expensive asset. Unlike renters insurance, homeowners insurance is not optional – if you’re getting a mortgage, you’ll be required to have a policy in place before you get the keys to your new digs. Here’s the good news: finding the right policy for you (and getting a great deal) is simple.

- Stephen Freudenberg, Head of Homeownership @ Gravy

Insurance is one of the only products you pay for that you hope to never use.

Your new home is not just where you’ll live, but it will also be your biggest financial asset. Ideally, you never need to make a claim on your insurance policies. Unfortunately, $#*! happens, and when it does, you’ll be glad you’re covered.

Here are the top seven questions you may have when buying homeowners insurance for the first time:

#1: What is homeowners insurance?

Homeowners insurance pays for you to repair or rebuild your home, and replace your belongings in the event of a fire, a falling tree, theft, vandalism, or damage caused by weather such as lightning, wind, or hail.

You will also be covered for costs related to accidents that happen on your property, for example, if the mailman slips on your steps and gets hurt.  

In exchange for this protection, you pay a premium (aka a fee) to an insurance company.

If a covered event occurs, you will submit a claim to the insurance company detailing what happened, and they will compensate you accordingly.

By paying a little bit each month for coverage, you can recover from catastrophic events that might cause hundreds of thousands of dollars in damages. The goal is to make mishaps manageable.  

#2: Do I need homeowners insurance?

If you’re getting a mortgage, yes. Mortgage lenders require borrowers to have an active homeowners insurance policy in place before closing on a loan.

Why? A mortgage lender has a financial interest in your home until the loan has been paid off. They want to make sure that if the house is destroyed you will still be able to pay for your mortgage.

Buying your house with cash (i.e. no mortgage)? You aren’t legally required to have homeowners insurance, but you still should buy a policy. Without coverage, if something happens to your home, you are personally on the hook for 100% of the costs.

#3: What is covered under a homeowners insurance policy?

In general, standard homeowners insurance policies will include four basic types (or levels) of coverage:

#1: Structural

This is the part of your policy that covers you if your home becomes damaged or destroyed by a covered event.

#2: Personal Property

This coverage helps you replace certain items within your home (e.g. clothing, furniture, electronics, and jewelry) that may have been destroyed or damaged during a covered event. This can also cover theft of items, although there are special limits.

#3: Liability

If an accident occurs in your home or on your property, the medical and legal fees for the injured party are covered. For example, if your guest slips and falls on your property.

#4: Additional Living Expenses

If you are unable to live in your home for a period of time due to damage caused by a covered event, then your policy will typically help you cover living expenses, such as a hotel bill, while your home is repaired.

You can also elect to buy coverage for additional events (e.g. floods, earthquakes, etc.) that are not included in a standard policy.

#4: How much homeowners insurance coverage do I need?

You need to have at least enough coverage to meet the requirements of your mortgage lender. At a bare minimum, that means having a policy with coverage for the full amount of your loan.

For first-time homebuyers, it can be tempting to go for the cheapest policy with the lowest allowable coverages. The right amount of coverage for you, however, will be a policy that fits within your budget while simultaneously protecting your home at the highest level possible.

Usually, this means having a policy that provides for both the full replacement cost of your home and personal property. That is to say, if your house burns to the ground, insurance will cover the entire cost of your rebuild (less any deductible), and you’ll be able to afford a new TV rather than get the money for the cost of your old one.

It’s also a good idea to pay a little more for additional coverages that are relevant for you. Live in California? Add earthquake protection. Live in Louisiana? Flood protection. Buying a home with a basement? Get water back-up coverage.

#5: How much will homeowners insurance cost?

On average, homeowners insurance costs about $100 per month, but your policy premium could be much higher or lower, and will depend on a few main factors:

The value, age, and location of the house

Your desired coverage levels

The deductible

Your credit score and past claims history

Use this tool to get a better sense for what policies cost for homes in your target search area:

#6: When should I start shopping for homeowners insurance?

Once your offer has been accepted and you have the address of your future home, it’s time to get your homeowners insurance squared away.

You can quickly get a quote online that balances coverage and price, but don’t be afraid to pick up the phone. Insurance is confusing, and it’s important to get the right coverage in place to protect yourself.

A quick call with an insurance agent to talk about your individual needs is the fastest way to get the right policy for you. Plus, your insurance agent will coordinate with your lender and realtor to make sure everything goes smoothly on closing day!

Ready to go? Gravy partners with Matic to find the best insurance for you (for free). Just tell us a bit about your new home and we will find you the best coverage and the best price. On average, we can save you $642/year* on your policy. Not only will you get the best deal today, but we can also re-shop your coverage every year for you (free of charge) to make sure you still have the best rate. Shop 40+ major homeowners insurance carriers right now with a few clicks.

#7: Any other tips and tricks?

  • Have a car? Bundle your home and auto policies to save money.
  • Don’t forget to factor your insurance premiums into your housing budget! Each month, you’ll pay the principal and interest on your mortgage, taxes, association fees (if applicable), and insurance.
  • Be sure to get at least two quotes to compare. You can save a lot of money by shopping around online and asking if any discounts are available.
  • Once you’ve moved in, it’s always a good idea to re-shop your policy every year or two to make sure you are still getting the best rates.
Not moving just yet? Check out Gravy, the only homebuying app built for renters. Earn rewards on rent and redeem them toward your future home purchase, save up in the ultimate high-yield account for down payments, track your mortgage credit score, and learn all about the homebuying process. There’s no landlord involvement and you can get started for free. Join Gravy now.

*Average of the difference for Matic customers' prior insurance policy and their new policy for all homeowners who found savings, submitted to Matic between June 2020 and June 2021. Includes homeowners who became Matic policyholders and where the customers' prior insurance premium amount is known to Matic.

This Blog is made available by Matic Insurance Services, Inc. for educational and informational purposes only. Matic makes no representation or warranty of any kind, express or implied, concerning the accuracy, completeness, or suitability of the information contained herein. Insurance products and services described may not be offered in all states. Eligibility for insurance will be determined at the time of application based upon applicable underwriting guidelines and rules in effect at that time. A Matic Insurance Agent can offer you practical guidance and answer questions you may have before you buy.

Stephen Freudenberg
Stephen Freudenberg
Head of Homeownership at Gravy
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