The short answer: It depends.

Key takeaways:

  • You don’t necessarily have to pay more just because you’re a first-time homebuyer
  • Many variables go into your first-time home insurance rate
  • You and your property are both key factors in determining your rate

Being a first-time homebuyer is exciting, but it also has its share of challenges. Whether it’s getting a home loan, finding a real estate agent, or buying homeowner’s insurance (let alone finding that perfect property), there are a lot of balls to juggle.

To complicate matters, home prices are up nearly 20% from 2021 to 2022, putting the average cost of a home in the U.S. at $454,900. That’s a big investment that you need to protect with an insurance policy that also fits within your budget. Here, we’ll walk you through the ins and outs of homeowner’s insurance, and dive into the factors that determine insurance costs for first-time home buyers.

What does it cover?

Most homeowners’ policies contain some fairly standard features:

  • Dwelling coverage. Protects the physical structure and any other buildings that are attached to the main dwelling.
  • Personal property coverage. Protects personal belongings that are destroyed by what’s known as a “covered peril,” a natural event such as fire, lightning, hail, or wind, or man-made events like vandalism or theft.
  • Additional living expenses coverage. Protects you from expenses incurred if your property is damaged and you can’t live there for a period of time. It covers lodging, food, and other living expenses.
  • Other structures coverage. Protects detached buildings or other property features such as a fence or shed.
  • Liability coverage. Protects you if someone files a lawsuit for injuries suffered while on your property.
  • Medical payments coverage. Protects others from medical expenses should someone be injured on your property.

There are, of course, exceptions to these policies, such as floods, sewer backups, or earthquakes. If you live in areas where these kinds of events are common, you will likely need to purchase additional coverage.

According to Bankrate’s analysis of rate data from Quadrant Information Services, the average cost of homeowners insurance in 2022 is $1,383 per year for $250,000 worth of dwelling coverage. But how much will you actually pay? Here are a few factors that will help answer that question.

Location, location, location

One of the biggest factors in determining your homeowner’s insurance rate is where you live. If you spend your days living on island time in Hawaii, your rate will be $1,182 per year, whereas if your home is in the tornado alley of Oklahoma, you’ll pay a far stormier annual fee of $2,000. If you zoom in further by zip code, the rate can continue to shift. If you live near police and fire departments, you may have a lower rate.

The value of your home

In general, the higher the value of your property, the higher your insurance costs will be. The replacement value is far cheaper for a $150,000 home than for one worth $1.5 million. Many homeowners underinsure their property, but that can lead to headaches when tragedy actually strikes.

How do you make sure you have enough coverage? Ask the experts. A professional appraiser can remove uncertainty and provide a much more precise value. Appraiser fees vary, with a typical, single-family home costing $300-$450 and larger homes, or homes in cities with higher living costs, in the range of $500-$800.

The age of your home

How old is your home? How was it built? What claims have been made on it in the past? These questions are all important to know to get a clear picture of your home insurance rate. In the event of damage, buyers need to have a true estimate of the cost to rebuild.

Older homes may have higher insurance costs since certain features are harder to repair and certain materials harder to find. These include stained-glass windows, plaster walls, hardwood floors, and ornate moldings. On the other hand, when you update your plumbing, heating, electrical, or even the roof, you can lower your rate. Always let your insurance agent know when you make a repair or improvement so you don’t miss out on potential savings.

Depending on your location, your home’s materials can also play a part in setting your rate (brick, wood, frame, masonry), as well as the home’s safety features (security system, sprinklers, and smoke detectors).

The roof

The roof is one of the most important features of any home. If it’s leaky or falling apart, your home’s value and safety are at risk. The roof is also a key part of determining your insurance rate. A new roof will get you a lower premium, older roofs often drive it up. Some carriers may even terminate your policy if your roof is in bad shape.

Your roof’s materials also help set insurance rates:

  • Insurers love metal, as is very sturdy, lasting up to 70 years.
  • Slate needs practically no maintenance and is resistant to rot, insects, and fire.
  • Asphalt shingle is the most common roofing material because it lasts for years and is affordable. But it does decay more quickly than slate or metal.
  • Wood isn’t fire-resistant and some insurers won’t even cover it.

If your roof has been around for 20 years or longer, you may need an inspection before an insurer will cover it, and then it might only be for the actual cash value. There are a few things you can do to improve your roof (and your chances for a low insurance rate) – get inspections every few years, keep it clear of debris, replace damaged shingles, and keep a photo record of any damage or improvements.

Your deductible

The general wisdom is that the higher your deductible, the lower your rate. Most insurance firms suggest a minimum of a $500 deductible, but if you bump it up to $1,000, you can save up to 25%. Your location may also necessitate having more than one deductible. If you have a cottage on the shores of Lake Pontchartrain in New Orleans, you’ll need a deductible for flood insurance, but if you have a Bay Area home on the San Andreas Fault, odds are you’ll have an earthquake deductible.

Personal information

Your personal life and finances also play a role in setting your homeowner’s insurance rates. One stat to keep in mind is your credit-based insurance score, where insurers may use your credit score as part of their calculus for your rate (or whether to cover you at all).

Your marital status can also be a factor. Have you been putting off popping the question to your significant other? Consider speeding up that timeline because it could lower your rate. Married couples tend to file claims less frequently than their single counterparts.

Get help from the experts

There are many variables at play that determine your home insurance rate. From credit scores to roof maintenance, it can all seem overwhelming. Luckily, you don’t have to hack your way through the insurance jungle alone. NICRIS Insurance can be your guide through this process with a free, personalized review that is designed to find the policy and rate that work for you.