Closing on a home is hectic. Between the inspection, the appraisal, the mortgage paperwork, and the endless cycle of “can you please send us this document again,” insurance often gets handled at the last minute — and that’s where first-time buyers make expensive mistakes. Here’s how to do it right.
Timeline: when to do what
4–6 weeks before closing:
- Get insurance quotes from at least 3 carriers (ideally through an independent agent who can do this in one call).
- Pick your policy. You don’t have to bind coverage yet, but know what you’re buying.
2 weeks before closing:
- Bind the policy. Your insurer will issue a binder (proof of coverage) that your lender and title company need to close.
- Send the binder to your mortgage lender and title company.
Day of closing:
- First year’s premium is typically paid at closing out of escrow. Your monthly payment to the lender will now include 1/12 of the annual premium in the escrow portion.
Day after closing:
- You own a house. Your policy is active as of the closing date, not before.
What to actually buy
Here’s the coverage checklist we go through with every first-time buyer:
Dwelling coverage (the big one)
This is the amount the insurer will pay to rebuild your home after a total loss. It should match the rebuild cost — not the market value and not the purchase price. Rebuild cost is based on square footage, finishes, local construction costs, and a few other factors. We’ll calculate it for you; most carriers have tools that do a decent job if you give them accurate inputs.
Common mistake: lenders sometimes ask you to insure for the loan amount. That’s often too low. If you paid $350K for a house that would cost $400K to rebuild, insuring for $350K leaves you $50K short after a fire. Insure to rebuild cost, not loan amount.
Other structures
Covers detached buildings — garage, shed, fence, gazebo. Usually defaults to 10% of dwelling coverage. If you have a big detached garage or barn, you may need more.
Personal property
Covers your stuff. Usually 50–70% of dwelling. Verify it’s enough for what you own — most first-time buyers are fine with the default.
Ask for replacement cost coverage, not actual cash value. Replacement cost pays to replace your 10-year-old couch with a new couch. Actual cash value pays you what a 10-year-old couch is worth. Replacement cost costs slightly more and is always worth it.
Liability
If someone gets hurt on your property or you accidentally damage someone else’s property, this pays. Do not go below $300K. We usually recommend $500K for homeowners, especially if you have kids, a pool, a dog, or any teen drivers.
Deductible
The amount you pay before insurance kicks in. Most first-time buyers pick $1,000, which is usually fine. Going to $2,500 can save $100–$200/year if you can afford it — the break-even is usually about 6–8 claim-free years.
The coverages first-time buyers always miss
These aren’t included by default on most policies. Add them:
- Water backup — covers sump pump and sewer line backups. The most common Michigan basement claim. Usually $30–$80/year.
- Service line coverage — covers repair of underground pipes and cables from the street to the house. Usually $30–$60/year. Utility lines are your responsibility, and digging them up is $$$.
- Ordinance or law coverage — if your home is damaged and building codes have changed since it was built, this pays the extra cost to bring repairs up to current code. Critical for older homes.
- Equipment breakdown — covers mechanical failures of major systems (furnace, AC, water heater, appliances). Not a warranty, but surprisingly useful. $25–$60/year.
Things that are NOT covered (surprises to avoid)
- Flood — even a little water from a rising stream. Requires a separate flood policy.
- Earthquake — separate endorsement if you want it (rarely needed in Michigan, but possible).
- Termite and pest damage — considered maintenance, not sudden loss.
- Mold — often excluded or severely limited unless caused by a covered water loss.
- Home business — if you operate a business from home, you likely need a separate business policy or endorsement.
The shopping move that saves the most money
Bundle your auto with your home. Virtually every carrier that writes both will give a multi-policy discount of 10–20% across both policies. If you’re switching insurers for home, re-quote auto at the same time.
When you’re ready to start this process — or if you just have questions about what you’re looking at — call or text us. We can quote 3–5 carriers in about 30 minutes and walk you through the differences line by line.