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First-Time Homebuyers: Smart Ways to Save on Homeowners Insurance
December 12, 2024
Buying your first home is exciting – but along with getting the keys, you also inherit a new expense: homeowners insurance. First-time buyers often experience sticker shock at the cost of insuring their home.
In the U.S., a typical homeowners policy averages about $2,100 per year for $300,000 of dwelling coverage, though it varies by location and home value. The good news is there are many ways to save money on your homeowners insurance even as a newcomer.
This guide will walk first-time homebuyers through smart strategies to lower your premium without compromising the protection for your new home.
1. Shop Around and Compare Quotes Early
Insurance premiums can vary widely from one company to another for the exact same home and coverage. Don’t settle for the first quote you receive. As a first-time buyer, start gathering homeowners insurance quotes as soon as you’re in the home-buying process (even before closing).
Compare at least 3 different insurers. Look at both large national companies and regional insurers, since each has its own pricing model. Why it matters: Each insurer weighs factors (home location, construction, your credit, etc.) differently. By shopping around, you might find one company offers a much lower rate for the same coverage.
In fact, some homeowners save hundreds of dollars per year just by switching to an insurer that offers a better rate for their profile. When comparing, ensure the coverage limits and deductibles are identical so you’re truly comparing price vs. value.
2. Bundle Home and Auto Insurance
If you own a car, plan to bundle your auto insurance with your homeowners policy with the same insurer. Insurance companies almost always offer a multi-policy discount when you purchase both home and auto coverage together. These bundling discounts typically range from 5% up to 15% off your premium.
For a first-time buyer on a budget, that’s a meaningful reduction. Bundling not only saves money, but it’s also convenient to manage one insurance package. When requesting homeowners insurance quotes, get a quote for auto at the same time (or vice versa) and ask how much the bundled rate is.
Keep in mind that while bundling is usually cost-effective, still compare the bundled price against separate policies elsewhere – occasionally, a standalone policy might be cheaper, but often the discount makes bundling worthwhile.
3. Take Advantage of New Homebuyer Discounts
You’re in a unique position: many insurers offer special discounts for new homeowners or first-time homebuyers. These are not always advertised upfront, so be sure to ask about them. For example, some companies have a discount if your home was purchased (or built) within the last year – essentially a “new home” discount.
You might also get a break for being a first-time buyer, as insurers see you as a new customer to attract. Additionally, opt into easy discounts that are common for many policyholders: choose paperless billing and autopay if available, as insurers often knock a few dollars off for these (it saves them admin costs).
If you’re a member of certain professional organizations or are a veteran, mention it – membership or veteran discounts could apply. These small discounts can add up to significant savings on your annual premium.
4. Improve Your Home’s Security and Safety
Insurance companies reward homeowners who reduce the risk of damage or theft. Even basic safety improvements can earn you discounts as a first-time homeowner. Make sure your new house has working smoke detectors on every level and install a burglar alarm or security system if possible. Many insurers offer discounts for smoke alarms, security alarms, or even deadbolt locks on exterior doors.
If your home comes with a security system, let your insurer know; if not, consider investing in a budget-friendly alarm or smart home security device. You could see a discount of a few percent on your premium for these measures. Living in a gated community or having fire sprinklers can also reduce costs. Beyond these, think about disaster-resistant improvements: for instance, if you’re in a hurricane-prone area, hurricane shutters or impact-resistant roofing might yield insurance credits.
As a new homeowner, you might not tackle these upgrades immediately, but it’s good to know for future negotiations – even installing a monitored alarm system now could lower your rate right away (some states even mandate insurers to give discounts for certain safety upgrades).
5. Choose a Higher Deductible
Your deductible is the amount you pay out of pocket on a claim before insurance covers the rest. First-time buyers are often cautious and might lean toward a low deductible (like $500). However, a higher deductible means a lower premium. By raising your deductible from $500 to $1,000 or even more, you can save a significant percentage on your annual premium.
For example, increasing to a $1,000 deductible might save you around 5-10% on premiums, depending on the insurer. Only do this if you have enough emergency savings to comfortably cover that higher deductible in case of a claim. Since new homeowners face many expenses at move-in, consider what deductible makes sense for your budget. If you can handle minor repairs out-of-pocket, take the higher deductible and enjoy the lower upfront cost of insurance.
Note: If your policy uses a percentage deductible (common in some disaster coverages), remember that as your coverage amount grows, that deductible amount in dollars grows too. Plan accordingly so you’re not caught off guard by a larger bill if you ever file a claim.
6. Maintain a Good Credit Score
It may surprise first-time homebuyers that your credit score can impact your homeowners insurance premium. In most states, insurers use a “credit-based insurance score” to help set rates – statistically, people with lower credit scores tend to file more insurance claims, so insurers charge them more.
This means if your credit score is solid, you’ll get a better price on home insurance. Conversely, a poor credit score can dramatically increase your costs. As a new homeowner, continue to monitor and improve your credit even after you’ve secured a mortgage. Pay bills on time, keep credit card balances low, and check your credit report for errors (you can get a free copy annually).
If your credit score wasn’t great when you first bought the home but later improves, ask your insurer for a re-rating – you might earn a lower premium going forward. Essentially, treating your credit health well can pay you back in many ways, including cheaper insurance.
7. Put Your Cards to Work – Use Kudos for Rewards
Monthly or annual insurance payments can be an opportunity to save money via credit card rewards. Many insurers allow you to pay your homeowners insurance with a credit card (often with no added fee). By using a cashback or rewards credit card to pay your premium, you can earn a percentage back – effectively a discount.
For example, charging a $1,500 annual premium to a 2% cashback card yields $30 in rewards. It’s not huge, but it’s free money for using the right card. Kudos can help you maximize this strategy. Kudos is a smart tool that helps you choose the best credit card for each purchase to get the most rewards. When it’s time to pay your insurance, Kudos can suggest which of your cards will earn the highest reward (or use any relevant card benefits) for that transaction.
This ensures you’re not leaving money on the table. First-time homeowners often have many new expenses; using Kudos to optimize your credit card rewards on big-ticket bills like insurance is an easy win.
(And don’t worry – using rewards in this way isn’t “double dipping” with any other programs, it’s simply smart use of your existing credit card perks.)
Over the years, these savings and rewards can offset a chunk of your insurance costs.
Frequently Asked Questions (FAQs)
When should a first-time homebuyer purchase homeowners insurance?
You should start shopping for homeowners insurance before you close on your house – in fact, your lender will likely require proof of insurance a few days prior to closing. It’s wise to begin gathering quotes as soon as you’re under contract to buy a home. This gives you time to compare rates and find savings.
What discounts can new homeowners get on insurance?
New homeowners can access many of the same discounts as existing owners, and a few special ones. Common discounts include multi-policy bundling (for combining home and auto), security system and smoke alarm discounts, paperless billing and autopay discounts, and sometimes a new homebuyer discount. If your home is newly constructed, insurers also often give a new home credit because new buildings tend to have fewer issues.
Does my credit score really affect my homeowners insurance rate?
In most U.S. states, yes – your credit score (or more specifically an insurance credit score derived from it) can significantly affect your premium. Statistically, lower credit is correlated with more frequent claims, so insurers may charge higher premiums to people with poor credit. As a first-time buyer, it’s important to maintain good credit habits.
How much homeowners insurance coverage do I need for my first home?
You should insure your home for its full replacement cost, not the purchase price or market value. Replacement cost is the amount it would take to rebuild your home from scratch if it were destroyed. For first-time buyers, this concept can be confusing – your land might be worth a lot, but you don’t need to insure land. Focus on the dwelling coverage. Work with your insurer to calculate a proper replacement cost; they’ll consider factors like your home’s size, construction materials, features, and local construction costs.
Should a first-time homebuyer use an insurance agent or buy directly online?
Either approach can work, and both have pros. Using an independent insurance agent can be very helpful for first-time buyers – the agent can explain coverage options, find discounts, and get quotes from multiple companies for you. This personal guidance costs you nothing (agents get paid by the insurer) and can simplify the process.
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