How Much Homeowners Insurance Do I Need on a New Home?

You need enough homeowners insurance to rebuild your house, not enough to cover what you paid for it. Insurance on the home itself is based on replacement cost, the money it would take to rebuild with similar materials, and the land is left out. If you have a mortgage, your lender will also set rules: Fannie Mae, for example, requires coverage on a replacement cost basis and caps the deductible at 5% of the coverage amount.

How much homeowners insurance do I need?

Start with the house, then add the rest. The North Carolina Department of Insurance, which explains a standard homeowners policy for consumers, says the dwelling part of a policy (called Coverage A) is normally the amount of money it would take to rebuild your home. It also says you should always carry at least 80 percent of the full replacement cost of the dwelling, and that the land the home sits on should not be counted.

Replacement cost is not the same as the price you paid. The price includes the lot, and the lot does not burn down. Replacement cost is what it would take to rebuild or repair your home with materials of similar kind and quality, without taking anything off for wear and age.

The same guide warns that if you insure your home for less than 80% of its replacement cost, the insurance company may not pay the whole cost to rebuild. Check your own policy for the exact terms.

What are the parts of a homeowners policy?

A standard policy has two halves. Section I covers your property. Section II covers liability, which is what you might owe if someone is hurt or their property is damaged. The North Carolina Department of Insurance lists the usual parts like this:

The $350,000 figure is an example only, not a typical cost to rebuild. Percentages from the North Carolina Department of Insurance consumer guide, checked November 3, 2026. Your policy may differ.

You can usually buy more than these amounts for an extra premium. The guide also notes that coverage is limited for some items, like cash, jewelry and collections, and that you can schedule those items separately.

How much homeowners insurance does a mortgage lender require?

Lenders set their own floors. The CFPB says lenders generally require proof that you have homeowners insurance, because they want the property protected. If you do not keep insurance, the CFPB says your lender is allowed to buy it for you and charge you after giving advance notice. That lender-bought policy may only cover the lender, not you, and it may cost more than a policy you choose yourself.

For loans sold to Fannie Mae, the Selling Guide (topic B7-3-02, updated August 5, 2026, and checked November 3, 2026) sets these rules for one- to four-unit homes:

• Replacement cost: the policy must cover the home on a replacement cost basis. Roofs must be insured, but do not have to be insured on a replacement cost basis.

• Required perils: at a minimum, fire or lightning, explosion, windstorm (including named storms), hail, smoke, aircraft, vehicles, and riot or civil commotion.

• Maximum deductible: 5% of the property insurance coverage amount. If the policy has a separate deductible for a peril like windstorm, each one must also be no more than 5%.

Using the example above, a 5% cap on $350,000 of coverage works out to a deductible of no more than $17,500. That is a lot of cash to have on hand after a storm, so look closely at the deductible, not just the premium.

Other loan programs and lenders can have their own rules. Ask your lender for its insurance requirements in writing early.

Does homeowners insurance cover floods?

Usually not. The CFPB says standard homeowner's insurance does not cover damage from earthquakes or floods, though it may be possible to add that coverage. The North Carolina Department of Insurance adds that most policies also leave out mudslides and landslides, and some policies leave out windstorm or hail, which may need a separate policy.

Ask two questions before closing: Is the home in a flood zone that the lender requires flood coverage for? And does this policy include wind and hail, or is that a separate policy? Our post on Florida flood insurance for home buyers covers how flood coverage works in a high-storm state.

How does homeowners insurance show up in my mortgage payment?

Many buyers pay for insurance through an escrow account. The CFPB explains that you pay the lender each month, the lender holds the insurance part in escrow, and the lender pays the bill when it is due.

Your insurance cost appears on page one of your Loan Estimate, in the "Projected Payments" section. The CFPB still suggests doing your own research on cost, and says you can shop separately for homeowner's insurance and choose your own provider. Under federal rules (12 CFR 1026.19(e)(3)(iii)), property insurance premiums are one of the closing cost lines that can change from the first estimate, so the number can move before closing. See our guide to what escrow is when you buy a house.

Is homeowners insurance the same as mortgage insurance?

1. The CFPB is clear that homeowner's insurance protects your property, while mortgage insurance is a different product. Our post on PMI explains when you need it and how to drop it.

What this means for new-construction buyers

Buying a brand-new home changes a few steps:

• Get quotes early. You may sign a contract months before closing. Start insurance quotes once you have the home's plan and address, so the insurance number in your loan file is real, not a guess.

• Insure the rebuild cost, not the contract price. A builder's price includes the lot. Ask the insurance company how it figures the cost to rebuild your plan, and make sure the dwelling amount is at least what your lender requires.

• Read the deductible. If the policy has a separate wind or named-storm deductible, check that it fits your lender's limit and your savings.

• Ask about new-home credits. Ask your insurance company whether any credits apply to a newly built home where you are buying. Our post on Florida home insurance cost on a new home looks at how this works in one state.

For questions about a specific community or today's numbers on a home, call 561-704-0091.

Common Questions

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Related reading: What is escrow when you buy a house? · What is PMI? · Escrow shortage: why new-home payments jump

Sources: NC Department of Insurance: Basic Homeowners Insurance · CFPB: What is homeowner's insurance? · Fannie Mae Selling Guide B7-3-02 · 12 CFR 1026.19 (eCFR)

This is general information, not financial, tax or legal advice. Figures checked November 3, 2026.