Buying Home Owner’s Insurance – What You Need to Know
One of the essential steps every homebuyer must take is getting adequate home owner’s insurance before closing on a new house. Most mortgage lenders require proof of coverage, and even if you’re paying cash, protecting your biggest investment is critical. The process of researching companies, getting quotes, and making a final decision can feel overwhelming, but a bit of preparation can make this requirement much more hassle-free.
Start With Comparison Sites
If you’re looking for new construction in the Savannah, GA area, a smart first step is to compare quotes online. Several web-based comparison tools are designed specifically for home insurance. Sites like ValuePenguin, NerdWallet, Lemonade, and The Zebra can help you quickly see a range of options.
When you compare “apples to apples” between at least three companies (same coverage amounts, deductibles, and features), you’ll get a clearer picture of the high, average, and lower cost plans available in your market.
Remember, though—price isn’t the only consideration. Homeowner’s insurance policies differ greatly in what they cover and, just as importantly, what they don’t cover. Your goal is to purchase a plan that covers you adequately without paying for extra protections you don’t need. The real value of any policy is the balance of coverage and cost.
Common Policy Types for New Construction
New construction homes are typically covered by one of three policy types:
HO-2 – Broad Form Coverage
HO-2 policies protect your home against 16 specific “named perils,” including:
- Fire or lightning
- Hail or windstorms
- Explosions
- Riots or civil commotion
- Damage from aircraft
- Damage from vehicles
- Smoke
- Malicious mischief or vandalism
- Theft
- Volcanic eruptions
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge of water or steam
- Sudden and accidental tearing apart, cracking, burning, or bulging of certain household systems
- Freezing of household systems
- Sudden and accidental damage from artificially generated electrical current
HO-3 – Special Form Coverage
An HO-3 policy is one of the most common choices for single-family homes. It typically protects your home against all perils except those specifically excluded in the policy. (Floods and earthquakes, for example, are often separate coverages.)
HO-5 – Premium Coverage
HO-5 policies are similar to HO-3 but provide a higher level of protection, especially for personal property. They’re often a good fit for homeowners who have more belongings to insure or want broader coverage with fewer exclusions.
Key Coverage Terms to Understand
As you compare policies, make sure you’re comfortable with these important terms:
Deductible
Your deductible is the amount you must pay out of pocket before your insurance company pays toward a covered claim. Lower deductibles mean higher annual premiums, and higher deductibles can reduce your monthly cost but increase what you’d owe in the event of a loss.
Liability Coverage
Liability coverage helps pay medical or legal bills if someone is injured on your property and you’re found legally responsible. This is especially important if you entertain often, have a pool, or own pets.
Personal Property
Personal property coverage protects the contents of your home—furniture, electronics, clothing, and other belongings. Make sure the limit is high enough to realistically replace what you own.
Premium
Your premium is the price you pay for insurance, whether annually, semi-annually, or monthly. When comparing quotes, always look at premiums alongside deductibles and coverage limits so you understand the full value of each policy.
Replacement Cost vs. Actual Cash Value
Replacement cost coverage pays what it actually costs to rebuild or replace your home or belongings (up to the policy limit), without subtracting depreciation.
Actual cash value coverage factors in depreciation, paying only what the item is worth today. Replacement cost typically offers better protection, but confirm the maximum amounts are sufficient for your home and contents.
Sub-limits
Many policies include sub-limits—smaller caps within your overall coverage limit. For example, a $500,000 policy might have a $250,000 sub-limit (50%) for personal property. High-value items like jewelry, collectibles, or electronics may need extra protection.
Riders (Endorsements)
Riders, also called endorsements, are add-ons that provide additional coverage for specific items or situations. Common riders include protection for expensive jewelry, artwork, antiques, or certain types of water damage that a standard policy may not fully cover.
Make Payments Easier With an Escrow Account
One of the simplest ways to manage your homeowner’s insurance premiums is through your escrow account. Most lenders prefer—and often require—that insurance be paid from escrow, ensuring your coverage stays current and the property remains protected.
Most lenders require the first year of insurance premiums to be paid at closing. Be sure your lender has a copy of your insurance policy and the funds needed to cover that first year so there are no surprises on closing day.
Need Guidance for Your New Ernest Home?
Still have questions? The team at Ernest Homes is here to help you navigate the home buying journey from start to finish—including understanding homeowner’s insurance. We can connect you with trusted local lenders and insurance professionals who will take the time to review your needs and help you choose the right coverage for your new home.
Call us at 912-660-9673 or send us a message through our Contact Us page. We’d love to help you feel confident and protected in your new Ernest home.
