For a new home, you typically need homeowners insurance with enough dwelling coverage to rebuild, plus other structures, personal property, liability, and loss-of-use coverage. Depending on location and finances, also consider flood insurance, earthquake coverage, an umbrella policy, owner's title insurance, and endorsements such as water backup or replacement cost on contents.
Closing on a new home is exciting, and a little overwhelming. Between inspections, appraisals and moving boxes, insurance can feel like one more form to sign. But the coverage you choose now decides whether a fire, storm or lawsuit becomes an inconvenience or a financial disaster.
If you have a mortgage, your lender will require homeowners insurance before closing. The lender’s minimum, though, is designed to protect the lender. This checklist helps you protect yourself, too.
What Coverage Do You Need for a New Home? The Core Policy
A standard homeowners policy, most often an HO-3 for single-family homes, bundles several coverages together. Review each one.
Dwelling coverage
This pays to repair or rebuild the structure of your home. The key word is rebuild. Your limit should reflect the cost to reconstruct the home with similar materials, which can be very different from what you paid for it or its market value, since land is not part of the rebuild cost. Ask your insurer or agent how they estimated the rebuilding cost and whether it reflects current local construction prices.
Other structures
Covers detached garages, fences, sheds and similar structures. It is often set as a percentage of dwelling coverage, so check whether that is enough if you have a large workshop or detached garage.
Personal property
Protects your belongings, from furniture to electronics. Ask whether claims are paid at actual cash value (which subtracts depreciation) or replacement cost (which pays to buy new). Replacement cost usually costs more but pays significantly more after a loss.
Liability and medical payments
Liability coverage helps if someone is injured on your property or you accidentally damage someone else’s property, including legal defense costs. Medical payments coverage handles smaller injury bills regardless of fault.
Loss of use
Also called additional living expenses. If a covered loss makes your home unlivable, this helps pay for a hotel or rental and extra costs like meals while repairs are done.
Coverage Your Standard Policy Probably Excludes
This is where many new homeowners get caught off guard. Standard homeowners policies generally exclude:
- Flood. Rising water from storms, rivers or heavy rain is not covered. You need a separate policy through the National Flood Insurance Program (NFIP) or a private flood insurer. NFIP policies usually have a 30-day waiting period, so do not wait for a storm forecast. Flooding can happen outside high-risk zones too.
- Earthquake. Requires separate coverage or an endorsement. Particularly worth considering in California, the Pacific Northwest and other seismically active areas.
- Sewer or drain backup. Often excluded unless you add an endorsement.
- Wear, tear and maintenance issues. Gradual leaks, rot and pests are generally not covered.
Also check your wind and hail terms. In some coastal states, windstorm or hurricane coverage may carry a separate, higher deductible, or may need to be purchased through a separate policy or state plan.
Endorsements Worth Considering
Endorsements (also called riders) customize your policy. Common ones include:
- Water backup coverage
- Extended or guaranteed replacement cost on the dwelling, which adds a cushion if rebuilding costs more than expected
- Ordinance or law coverage, which helps pay to bring a rebuilt home up to current building codes
- Scheduled personal property for jewelry, art, collectibles or instruments that exceed standard limits
- Home business coverage if you work from home with business equipment or clients visiting
- Service line or equipment breakdown coverage
Beyond Homeowners Insurance
Owner’s title insurance
Your lender will usually require a lender’s title policy, but that protects the lender. An owner’s title policy protects your ownership if a title problem from before your purchase surfaces later. It is typically a one-time cost paid at closing.
Umbrella insurance
If you have significant assets or future earnings to protect, an umbrella policy adds extra liability coverage above your home and auto limits. Owning a pool, trampoline or dog can raise your liability exposure.
Life and disability insurance
A mortgage is a long-term commitment. Term life insurance can help your family keep the home if you die, and disability insurance can help keep payments going if you cannot work.
Special Situations for New Homeowners
Condos and townhomes
If you buy a condo, the association’s master policy usually covers the building’s shared structure, but you typically need your own HO-6 policy for your unit’s interior, your belongings and your liability. Ask the association for a copy of the master policy so you know exactly where its coverage stops and yours begins, and check whether you could be charged a loss assessment after a major claim.
New construction and vacant periods
If your home is still being built, the builder generally carries builder’s risk coverage until closing. And if your new home will sit empty for an extended time before you move in, tell your insurer, since many policies limit coverage for vacant homes.
Your New Home Insurance Checklist
- Get quotes from several insurers well before closing.
- Confirm the dwelling limit reflects the full rebuilding cost.
- Choose replacement cost for both dwelling and contents if you can.
- Pick a deductible you could comfortably pay tomorrow.
- Check your flood risk and price a flood policy, keeping the waiting period in mind.
- Ask about earthquake and windstorm coverage if relevant to your area.
- Add endorsements for water backup, valuables and code upgrades.
- Review liability limits and consider an umbrella policy.
- Buy an owner’s title policy at closing.
- Make a home inventory with photos or video once you move in.
- Ask about discounts for bundling with auto, security systems or a newer roof.
Bottom Line
The coverage you need for a new home starts with a solid homeowners policy that can actually rebuild your house, then fills the gaps: flood, earthquake, water backup, high-value items and extra liability protection. Coverage options, exclusions and requirements vary by state and insurer, so read your policy carefully, ask questions about every exclusion, and work with a licensed agent to tailor the checklist to your home and location.
Frequently asked questions
Is homeowners insurance required when buying a home?
No state law requires it, but mortgage lenders almost always do. Even if you pay cash, going without coverage puts your largest asset at risk.
Should my dwelling coverage match my purchase price?
Not necessarily. Dwelling coverage should reflect the cost to rebuild the home, which excludes land value and can be higher or lower than the purchase price.
Do I need flood insurance if I am not in a high-risk flood zone?
Your lender may not require it, but flooding happens outside high-risk zones too, and standard homeowners policies exclude flood. Policies in lower-risk areas are often worth pricing.
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This article is for general information only and is not insurance, legal, tax or medical advice. Rules, coverage and prices vary by state, plan and insurer. Check your policy documents and speak with a licensed agent, your HR department or HealthCare.gov before making decisions.
