New Home Insurance: When to Buy, What It Costs & Builder's Coverage

When to Secure Home Insurance on a New Home

Timing your homeowners insurance is one of the most critical, and most overlooked, steps in the homebuying process. Most lenders require proof of homeowners insurance (often an insurance binder or declarations page) before they will allow you to close on the loan. In practical terms, that means you need to have your policy in place and your declarations page submitted to the lender at least a few business days before your closing date. Policygenius notes that most lenders will require proof anywhere in the days, and in some cases, weeks ahead of closing. Many lenders will ask for your insurance binder a few days before the scheduled closing date, while some loan programs may require it one to two weeks before closing.

To avoid last-minute scrambling, most housing professionals recommend shopping for insurance 30 days before closing and finalizing your policy at least 2 weeks out. This timeline gives you room to compare quotes from multiple carriers, complete any underwriting review, and handle any property-specific complications like location-related risk factors or high-value features.

The Insurance Closing Timeline

Once you secure the policy, coverage usually starts on the closing date of the home purchase, so the property is protected as soon as ownership transfers. You typically pay the first year's premium at closing, and funds may be collected for an escrow account to pay future insurance bills. Learn more about home insurance costs and how premiums are structured before you start shopping, and review the essential home insurance questions to ask every carrier.

Builder's Risk Insurance vs. Permanent Homeowners Insurance

If you are purchasing a newly constructed home that is still being built, there is an important coverage gap you need to understand: a standard homeowners insurance policy is designed for completed, occupied dwellings. It does not adequately protect a home that is actively under construction.

That is where builder's risk insurance (also called "course of construction" insurance) comes in. Builders risk insurance is a specialized form of property/inland marine insurance that covers a structure and related property during construction, renovation, or major repair. It covers the building itself, materials stored on site, and in most cases materials in transit or temporarily stored off site. When a covered event causes physical damage, the policy pays for repairs, replacement materials, and debris removal.

Builder's risk policies are temporary, typically tied to the construction timeline, and expire when construction is complete and a certificate of occupancy is issued. Builders risk is priced as a percentage of total completed project value, almost always between 0.5% and 1%, with new construction sitting at the lower end of that range. In 2026, builders risk is drawing more scrutiny: longer timelines, phased builds, and weather exposure are influencing deductibles and terms earlier than many clients expect, with higher deductibles and increased scrutiny around values and timelines.

If you're managing a remodel rather than a ground-up build, our home insurance during renovation guide walks through what your HO-3 covers and where the gaps are. For a deeper dive into permanent policy types, see our comprehensive home insurance guide to understand which permanent policy best fits a new home.

New Construction Home Insurance: Costs & Discounts

Here is the good news: new homes are significantly cheaper to insure than older ones. Insurers view new construction favorably because it means modern building codes, updated electrical and plumbing systems, new roofing materials, and lower likelihood of wear-related claims. According to The Zebra's 2026 report, newer homes tend to be the least expensive to insure. Insurance prices increase sharply for homes more than 5 years old, and then very gradually for homes older than that. Insurers are also utilizing drone technology and data analysis to identify homeowners with older properties or outdated plumbing and electrical systems, and homeowners with poorer "risk scores" may find fewer insurers willing to compete for their business, often resulting in higher premiums.

Why Insurers Love New Construction

• New roof: Modern roofing materials, especially impact-resistant options, can reduce your premium meaningfully
• New electrical systems: Updated wiring eliminates fire risk associated with aging electrical panels
• New plumbing: No lead pipes, no corroded fittings, so far less risk of water damage claims
• Smart home & security systems: Smoke detectors, fire alarms, water leak sensors, and monitored security systems can cut premiums by an additional 5-20%
• Building code compliance: Newer homes built to current codes suffer less damage in storms, which lowers your risk profile

2026 Home Insurance Cost Benchmarks

The average cost of homeowners insurance in the U.S. is about $2,490 a year for $400,000 worth of dwelling coverage, but rates vary by state. Oklahoma, Nebraska and Kansas are the most expensive states for home insurance. For a brand-new home, your effective rate could be meaningfully below that figure because of the new-construction risk profile. Be sure to also explore our guide on construction cost inflation and home insurance to make sure your limits keep pace with rising rebuild costs.

Embedded Insurance Programs from Builders

An increasingly common feature in new home communities is embedded insurance, a program where the builder has partnered directly with an insurance provider to offer integrated homeowners coverage at the point of sale. Embedded insurance is offered by certain builders to build your home insurance policy right into your new-home purchase, allowing you to secure home coverage from the jump and skip the extra step of shopping for a separate policy before closing. To offer embedded insurance, builders partner directly with insurance companies to integrate homeowners insurance into the buying process, with Westwood Insurance Agency and Hippo Insurance being two major players in the space.

With an embedded model, builders can incorporate homeowners insurance early in the sales workflow. Westwood Insurance Agency uses a technology platform that integrates with a builder's sales process, pre-underwriting the home from property information and delivering a personalized quote within 24 hours of contract signing. Westwood's network includes more than 50 insurance companies, offering buyers access to a range of coverage and pricing options.

Embedded insurance can be convenient and may offer exclusive discounts not available through traditional channels. By integrating insurance options directly into the home buying process, embedded insurance can offer competitive pricing and discounts on new homes that may not be available through traditional channels and could save homeowners as much as $900. However, convenience shouldn't replace comparison shopping. Always get at least two or three competing quotes (learn how with our home insurance quote guide) before committing to a builder's embedded insurance program.

Common Mistakes First-Time Homebuyers Make With Insurance

New homeowners, especially those buying their first property, make several predictable insurance mistakes that can cost them significantly. Here are the most important ones to avoid:

1. Insuring Based on Mortgage Balance, Not Replacement Cost

This is the most financially dangerous mistake. One of the most common mistakes homeowners make when purchasing property insurance is not buying enough coverage, or not buying the right insurance coverage for their true needs. Your mortgage balance (or even your purchase price) is not the same as your home's replacement cost, which is what it would actually cost to rebuild the structure from the ground up at today's material and labor prices. A property should not be insured for the amount of the mortgage, or for the original purchase value. Rather, the coverage should be based on what it would cost to rebuild the dwelling in the current market at current prices for building materials and construction labor.

Always base your dwelling coverage on a proper replacement cost estimate. Our guides on dwelling coverage limits and how much home insurance you really need explain exactly how to set the right limits.

2. Choosing the Cheapest Policy Without Comparing Coverage

Shopping on price alone is a recipe for gaps and denied claims. A cheap policy may exclude key perils, carry high deductibles, or come from a financially unstable carrier. Make sure that your "cheap" policy isn't less expensive because important coverage has been removed or because the company has inadequate reinsurance. Compare at least three quotes based on coverage breadth, not just the dollar amount.

3. Not Accounting for Inflation

Construction costs rise every year. Inflation has led to higher expenses for repairing and reconstructing homes, which, in turn, results in insurers disbursing more funds when claims are made. From 2020 to 2023, replacement costs for property and casualty losses rose by an average of 45%. A coverage limit that was appropriate at closing can become dangerously inadequate within a few years. Ask about inflation protection endorsements that automatically adjust your dwelling coverage limit annually.

4. Reducing Limits Instead of Raising the Deductible

People often make the mistake of reducing the amount of coverage on their home in an attempt to bring down their premium. A better approach would be to carry strong coverage and simply raise your deductible. You still get a lower premium, but you keep the robust coverage you actually need at claim time.

5. Skipping Flood and Sewer Backup Coverage

Standard homeowners policies exclude flooding entirely and typically exclude sewer backup without an add-on endorsement. Standard home insurance doesn't cover floods, sinkholes, wear and tear, or termite damage. If your new home is in a flood-prone or storm-risk area, you need separate flood insurance. Learn more in our guide on hazard insurance vs. homeowners insurance.

6. Not Reviewing Coverage After the First Year

Your new-home discounts and coverage needs can change. After Year 1, shop your policy again at renewal, especially if your premium has shifted, and update limits if you've added a fence, deck, detached garage, or other structures. Our first-time buyer guide walks through the renewal checkpoints.

Documentation Checklist for New Home Insurance

Gather this information before calling insurers to streamline quoting and get the most accurate rates:

Frequently Asked Questions

Do I need homeowners insurance before I close on a new home?

Yes. If you are financing with a mortgage, your lender will require proof of homeowners insurance before releasing funds at closing. Most lenders want your declarations page or insurance binder submitted at least a few days before closing, and some require it one to two weeks in advance. It is smart to start shopping 30 days before your closing date to allow time for comparison and underwriting.

What is builder's risk insurance and do I need it as a buyer?

Builder's risk insurance is a temporary policy that covers a home during the construction phase, protecting the structure, materials, and equipment from risks like theft, fire, and weather damage. While many builders carry their own builder's risk policy, their coverage protects the builder, not necessarily you. If you are custom-building a home or overseeing your own construction project, purchasing your own builder's risk policy ensures your financial interest is protected. In 2026, builders risk premiums typically run between 0.5% and 1% of total project value for new construction.

How much can I save on insurance for a brand-new home?

Newer homes tend to be the least expensive to insure, with insurance prices increasing sharply for homes more than 5 years old. The exact savings vary by location and insurer, but a brand-new home can frequently come in several hundred dollars per year below the national average. On top of the base new-home discount, additional savings are available for security systems, smart home devices, and impact-resistant roofing.

What is embedded insurance from a builder?

Embedded insurance is a program where a home builder has partnered directly with an insurance carrier (such as Westwood Insurance Agency or Hippo) to offer homeowners coverage integrated into the purchase process. At closing, the buyer receives a pre-arranged insurance quote tailored to the specific property, sometimes with access to exclusive discounts worth up to $900. While this simplifies the process, you should still compare quotes from outside providers to make sure you are getting the best rate and most appropriate coverage.

What is the biggest insurance mistake new homebuyers make?

The most costly mistake is underinsuring, specifically setting your dwelling coverage based on your mortgage balance or purchase price rather than the actual replacement cost to rebuild the home. In the event of a total loss, you could be left with a significant gap between what your insurer pays and what it actually costs to rebuild. Always request a replacement cost estimate from your insurer and revisit that figure annually as construction costs rise.