Home Insurance: Tips for Discounts & Savings

Thinking about buying your first home? Here’s a detail many first-time buyers overlook until the last minute: homeowners insurance. You need it before you get the keys, and the decisions you make here affect your monthly budget for years.

So let’s break it down-what you should know, what to watch for, and how to keep your costs under control.

If you’re taking out a mortgage, your lender will require homeowners insurance before closing. This protects their investment as much as yours.

Here’s how it works:

• You must show proof of insurance before the closing date.

• You’ll usually pay the first year’s premium upfront at closing.

• If your down payment is under 20%, the lender will set up an escrow account. Your monthly mortgage payment will include property taxes and insurance.

• If your insurance lapses, the lender can buy force-placed coverage. That’s more expensive and covers less, so you don’t want that.

Takeaway: Start shopping for insurance at least two weeks before closing so you’re not scrambling at the last minute.

Insurance is about replacing your home if something goes wrong-not covering its market value.

Replacement cost is key. Your policy should cover the full rebuild cost of the house, not the land value. Including land value in coverage makes your premium higher for no reason.

Most buyers choose HO-3 policies. They cover your home and detached structures against almost everything except listed exclusions. Personal belongings are covered for named risks like fire or theft.

Coverage basics include:

• Dwelling

• Other structures

• Personal property

• Loss of use (extra living costs if you can’t stay in the home)

• Personal liability

• Medical payments to guests

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Older homes may need HO-8 coverage. This policy often covers at actual cash value instead of replacement cost. That matters if the home is more than 40 years old or has outdated systems.

Takeaway: Use a replacement cost calculator before setting coverage limits. Over-insuring or under-insuring both cost you.

The property itself has an insurance record, and it follows the house-not just the owner.

• Insurers look at CLUE reports (Comprehensive Loss Underwriting Exchange). These show seven years of claims for the property.

• A home with past claims, like water damage or fire, usually comes with higher premiums.

• Ask the seller for the CLUE report during the buying process.

Takeaway: A cheaper home with a long claims history might cost you more in insurance every year.

Premiums are not fixed. You have options to keep them manageable.

Get quotes from at least three companies. Same coverage, different prices.

Bundling home and auto can cut your premiums by 10% to 25%.

Ask about discounts:

• New home or first-time buyer discounts

• Safety features like alarms, deadbolts, sprinklers

• Paying upfront or going paperless

• Credit matters. In most states, a poor credit score can raise premiums by over 100%. Strong credit can save you 20% or more.

• Deductibles save money. A $1,000 deductible instead of $500 might lower your annual bill by 25%.

• Avoid small claims. One minor claim can increase your rate by 20% for years.

• Watch high-risk features. Pools, trampolines, and similar additions raise liability costs.

• Update the house. New electrical, plumbing, HVAC, or a storm-resistant roof often lowers premiums.

Takeaway: Think long-term. The steps you take to improve your credit, maintain your home, and reduce risk save you every year.

Standard policies don’t cover everything. Don’t assume you’re fully protected.

• Floods and earthquakes: Not included in HO-3. You need separate coverage if you live in a risk zone. Lenders will require flood insurance in FEMA-designated areas.

• Maintenance issues: Insurance won’t pay for wear and tear or old systems breaking. That’s on you.

• Home businesses: Standard coverage usually caps business equipment at $2,500 and doesn’t include liability. If you run a business from home, get extra coverage.

Takeaway: Read exclusions carefully. If you’re in a flood or quake area, budget for those policies now.

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