Buying your first home in New England is equal parts excitement, stress, and relief. After you close on the mortgage, you’re ready to unpack boxes, pick paint colors and finally enjoy your own space. It’s easy to think the hardest part is over. But many first‑time homeowners overlook one essential detail: your homeowners insurance isn’t “set it and forget it.”
Unlike rent or a cell phone bill, your homeowners policy is a complex contract that should reflect the true value of your home, your belongings, and the unique risks in your region. As property values rise and weather events become more extreme, out‑of‑date coverage can leave your biggest investment dangerously under‑protected.
Why First‑Time Buyers Are at Risk
Home buyers often purchase whatever policy their mortgage lender arranges without digging into the limits, deductibles, or exclusions. Here are a few reasons new homeowners stumble:
Bundled Coverage With Minimal Review
Most lenders require basic homeowners insurance before closing but do not require you to customize coverage. These policies meet the lender’s needs (protecting the mortgage) rather than your own. Without reviewing your policy in detail, you may be over insuring some things (like the market value of the home) and underinsuring other things like your replacement cost or liability limits.
Underinsurance Is Alarmingly Common
Did you know that 60 % of U.S. homes are undervalued by an average of 17% according to Insurance Business Magazine? That means most homeowners will not have enough coverage to fully rebuild their home if disaster strikes.
Rising Reconstruction Costs in New England
New England’s construction costs have spiked in recent years. A combination of factors like labor shortages, supply chain issues, inflation, and increased costs for materials like lumber are driving the trend. For homeowners in New England, these sustained increases mean that if your policy provided adequate coverage a few years ago, it might now be insufficient to cover the full cost of a rebuild.
For example, a 2024 analysis of reconstruction costs found that New Hampshire saw a 7.66% increase in residential rebuild costs between October 2023 and October 2024, while Vermont’s costs rose 8.2%. These regional increases mean that even homeowners who had adequate coverage when they purchased may be underinsured today.
Confusing Market Value With Replacement Cost
A home’s market value includes land and location factors that an insurance policy doesn’t replace. Replacement cost, on the other hand, is the amount your insurer would need to rebuild your home from the ground up. When home buyers set coverage based on purchase price or real‑estate appraisal, they risk large gaps between what the policy will pay and what it actually costs to rebuild.
With those risks in mind, let’s dive into how to avoid the most common insurance pitfalls new homeowners make.
The 7 Pitfalls and How to Avoid Them
1. Confusing Market Value With Replacement Cost
The pitfall: Insuring your home for what you paid, or its current real‑estate appraisal can leave a coverage gap. Market value considers your land, neighborhood, local demand, and other factors. These costs aren’t included in what your insurer will pay to rebuild your home.
Why it matters: If a fire or storm destroys your home, you need enough insurance to cover demolition, debris removal and reconstruction materials priced at today’s rates. With New England’s rising rebuild costs, underestimating your replacement cost could leave you paying tens of thousands of dollars out of pocket.
How to avoid it:
- Request a professional replacement‑cost estimate from a local insurance expert. Many insurers provide tools or will arrange an inspection to calculate your home’s rebuild cost based on local construction materials and labor rates.
- Revisit your coverage annually or whenever rebuild costs change significantly. What was sufficient last year might be inadequate now.
- Understand the “80 % rule.” Many policies require that you insure your home for at least 80% of its replacement cost to receive full compensation in a partial loss. If your coverage is lower, your insurer may pay only a portion of the claim. For example, if you carry 50% of your replacement cost, the insurer might pay only 50% of a loss.
Real‑world scenario: A couple insures their 1920s home for its $250,000 purchase price. When a major kitchen fire destroys most of the first floor, they discover reconstruction will cost $330,000 due to building‑code updates and higher labor costs. Without enough replacement‑cost coverage, they are forced to use savings and a home‑equity loan to complete their rebuild.
2. Ignoring Deductible Clauses for Wind or Water Damage
The pitfall: Standard homeowners policies typically carry a flat deductible (e.g., $1,000). But many insurers apply special deductibles for hurricanes, named storms or windstorms in coastal states. These deductibles are usually a percentage of the home’s insured value, not a fixed dollar amount.
According to the National Association of Insurance Commissioners (NAIC), named‑storm deductibles can range from 1% to 10% of the insured value. A home insured for $400,000 with a 5% deductible means you would pay $20,000 out of pocket before insurance coverage applies.
Why it matters: After a nor’easter, flood, or hurricane, you could face tens of thousands of dollars in damage before your insurance pays anything. Many first‑time buyers don’t realize this until a claim is filed and by then it’s too late.
How to avoid it:
- Read your policy and look for a separate deductible labelled “Hurricane,” “Named Storm,” “Windstorm” or “Special Wind.” If you’re unsure or can’t find this information, contact a local insurance agent today.
- Calculate your potential out‑of‑pocket exposure. If your policy has a 5 % hurricane deductible and you carry $400,000 in coverage, you should be prepared to pay $20,000 before insurance pays a penny.
- Discuss storm coverage with your agent. They can explain options such as separate wind policies, higher deductibles, lower premiums, or other options that fit your unique needs.
Real‑world scenario: Say during Tropical Storm Henri in 2021, a homeowner had a policy with a 2% hurricane deductible. Their $300,000 home suffered $25,000 in roof and interior water damage. Because the storm had been named, the deductible rose to $6,000, leaving the homeowner responsible for nearly a quarter of the repair costs.
Pro Tip: Named-storm coverage is an insurance deductible applied to damage from tropical storms or hurricanes named by the National Weather Service. Typically, a higher percentage of a home’s insured value, it covers wind-related damage but excludes flood damage, which requires a separate policy.
3. Skipping Flood Insurance
The pitfall: New homeowners often assume their standard policy covers all water damage. In reality, most homeowners policies exclude flooding from rain, storm surge, river overflow or melting snow. Homeowners may think they’re safe if their mortgage lender doesn’t require flood insurance — but flood risk extends beyond mapped zones.
In fact, about 25% of flood damage occurs outside mapped flood zones, and one inch of water can cause more than $25,000 in damage. Flooding can come from heavy rain, spring snow‑melt, blocked drainage systems, or water‑main breaks, which are all risks in New England. For example, Vermont experienced catastrophic flooding in July 2023 when torrential rain caused rivers and streams to overflow. Many affected properties were outside high‑risk zones.
How to avoid it:
- Check your flood risk. Use FEMA’s Flood Map Service Center to see if your home sits in or near a high‑risk area. Even if it doesn’t, consider coverage. The 25% statistic underscores that “low risk” does not mean “no risk.”
- Purchase separate flood insurance. Flood coverage is available through the National Flood Insurance Program (NFIP) and private insurers. Premiums vary based on location and elevation but are often reasonable relative to the cost of repairing flood damage.
- Document your home’s lowest floor elevation. If your home is elevated above the base flood elevation, it may qualify for lower premiums.
Real‑world scenario: In 2023, a couple in Montpelier, Vermont, had just bought their first home, a colonial built in 1965. Their lender did not require flood insurance because the property was outside a FEMA zone. When record rainfall flooded downtown Montpelier and the North Branch of the Winooski River overflowed, their basement and first floor filled with two feet of water. The repairs and replacement of appliances, flooring and walls cost significantly more than what an NFIP policy would have cost.
4. Overlooking Ordinance or Law Coverage
The pitfall: When you rebuild a damaged home, you may be required to meet updated building codes, even if those requirements weren’t in place when your house was built. Standard policies often cover rebuilding to “like kind and quality” but do not pay for code upgrades unless you add “Ordinance or Law” coverage.
For example, a new energy code requiring more expensive spray foam insulation rather than fiberglass and 2×6 exterior studs instead of 2×4 exterior studs mean a major rebuild could require expensive upgrades not covered under a standard policy.
Why it matters: Without ordinance or law coverage, you may have to pay for these code upgrades yourself. Imagine losing a sizable portion of your home to fire and then learning you must also replace all insulation with spray foam, change structural framing and upgrade electrical systems to meet current codes.
How to avoid it:
- Check your policy for Ordinance or Law (Code) coverage. It may be a separate line item or an endorsement. If you don’t have it, talk to an agent today.
- Assess your limits. Ten percent of your dwelling coverage may not be enough if your home is older or built under outdated codes. Consider increasing your limit if needed.
- Consult local builders or building officials to understand code upgrades required in your area.
- Document your home’s existing systems when you renew coverage so you can justify upgrades if a loss occurs.
Real‑world scenario: If a lightning‑induced fire destroyed the attic of a 1970s home in New Hampshire, the rebuild cost could balloon because the building would now have to meet current energy codes. Spray foam and improved ventilation add $45,000 to the project. Fortunately, the homeowner has increased ordinance or law coverage after reading about code updates. Their insurance pays for the upgrades.
5. Forgetting About Personal Property Valuations
The pitfall: Personal property coverage protects your belongings, but standard homeowners policies impose limits on certain items. Jewelry, fine art, antiques, collectibles, musical instruments, firearms, and electronics may have limits. The Insurance Information Institute notes that typical policies limit coverage for jewelry stolen from the home to around $1,500. If you have an engagement ring worth $5,000 or a collection of rare guitars, you could receive only a fraction of their value in a claim.
Why it matters: Losing or damaging items such as wedding rings, vintage furniture or high‑end laptops can be financially devastating without adequate coverage. In some cases, such as burglary, your deductible may also apply before any payout.
How to avoid it:
- Create a detailed home inventory. Photograph and record serial numbers, receipts, and appraisals for valuable items. You can use smartphone apps or spreadsheets; store a copy in the cloud.
- Ask your agent about covering personal property such as high‑value items. This often includes coverage for mysterious disappearance and broader perils than standard policies.
- Periodically re‑reappraise items. Jewelry and art can increase in value over time. Update your item amounts accordingly.
Real‑world example: If a homeowner has a standard policy with a $1,500 jewelry limit, her home is burglarized and she loses $8,000 worth of jewelry, her insurer only pays $1,500 after the deductible. If she has covered her wedding set and gold watch, the policy would reimburse the full value.
6. Not Adjusting Coverage After Home Improvements
The pitfall: Renovations and upgrades change both the value and risk profile of your home. Adding a new deck, finishing your basement, installing solar panels, or gutting your kitchen can increase the replacement cost by 10% to 20%, according to the Insurance Information Institute and various insurers’ guidelines. Many homeowners fail to inform their insurer, thinking they can update at renewal.
Why it matters: Failing to notify your insurer can lead to a coverage shortfall or even claim denial. Some policies require you to report major changes within a certain time period, sometimes as little as 30 days. If you add square footage or upgrade to high‑end finishes without updating your policy, your existing dwelling limit might not cover a total loss.
Some companies require homeowners to maintain coverage equal to at least 80% of their home’s replacement value and failing to update your policy after improvements can result in cancellation or non‑renewal.
How to avoid it:
- Contact your agent before starting significant work. They can advise how the project may affect your premiums or require endorsements (e.g., during construction).
- Increase your dwelling coverage at completion. Provide receipts, plans, or updated appraisals.
- Ask about discounts. Roof replacements, updated wiring, plumbing, or heating systems can qualify for lower premiums. On the other hand, adding a swimming pool or trampoline may require increased liability coverage.
- Keep permits and inspections. If work is not up to code, a claim could be denied. Document compliance with local building regulations.
Real‑world scenario: After renovating her 1890s farmhouse in Brattleboro, Vermont — adding a chef’s kitchen, finishing the attic, and installing solar panels — a homeowner left her coverage unchanged at $400,000. A year later, a kitchen grease fire destroyed much of the home. The rebuild estimate came in at $520,000 due to upgraded finishes and the cost of reinstalling the solar panel system. Because she hadn’t notified her insurer, coverage remained limited to $400,000, leaving her responsible for $120,000.
7. Underestimating Liability Risks
The pitfall: Many first‑time homeowners focus on property damage and forget about personal liability. If someone is injured on your property, you could be sued. Liability also covers incidents like your dog biting a neighbor or a tree falling on a visitor’s car. With more guests, contractors and deliveries arriving to new homes, your liability exposure increases.
The Insurance Information Institute reports that the average liability claim payout in recent years was around $32,000. Umbrella policies can provide additional liability coverage at a low cost depending on your location and risk profile. This coverage sits on top of your homeowners and auto policies to protect your assets if you’re sued.
Why it matters: Without adequate liability coverage, you could lose savings, retirement funds or be required to sell assets to satisfy a judgement. Basic homeowners policies often include $100,000 of liability protection, but major injuries or lawsuits can quickly exceed that.
How to avoid it:
- Increase your liability limits. Talk to your agent about raising your coverage to cover your risk profile.
- Consider an umbrella policy. You can add an extra $1–$2 million in liability protection to cover both home and auto claims.
- Mitigate hazards. Fix loose stairs, clear ice on walkways, fence pools, and trampolines, and ensure proper lighting. Document these efforts in case you need to defend against a liability claim.
- Understand dog or breed restrictions. Some insurers exclude coverage for specific breeds or require a dog‑bite exclusion. Be upfront about pets to avoid coverage gaps.
Real‑world scenario: A first‑time homeowner hosts a housewarming party in December. Snow from a prior storm melts and refreezes on the walkway. A guest slips, fracturing his ankle. The medical bills and lost wages are $40,000. Her homeowner’s policy has $100,000 of liability coverage, but the settlement also includes pain and suffering, approaching the limit. She now carries a $1 million umbrella policy and installs heated mats on the walkway during winter events.
Review Your Coverage Before Your First Winter
New England’s weather changes rapidly. A calm fall weekend can quickly turn into a destructive nor’easter or a deep freeze. As your first winter as a homeowner approaches, take the following precautions:
- Review your dwelling coverage: Ensure your coverage equals your current rebuild cost.
- Examine your deductibles: Understand any hurricane, windstorm or hail deductible percentages and confirm you can afford the out‑of‑pocket cost.
- Check for flood exclusion: If you don’t already have flood insurance, evaluate your risk. Remember that 25% of flood damage occurs outside high‑risk zones.
- Ask about ordinance or law coverage: Confirm your policy provides enough to meet code upgrades.
- Inventory your belongings: Document new purchases and consider insuring valuables.
- Update after improvements: Immediately inform your insurer when renovations are complete. Failing to do so can lead to non‑renewal or inadequate coverage.
- Assess liability limits: Raise them if needed and consider umbrella coverage if you host guests, have a pool or maintain a wood stove that could pose a risk.
Frequently Asked Questions
Does homeowners insurance cover my mortgage if I default?
No. Homeowners insurance protects your property and liability. Mortgage insurance or guarantee programs protect lenders, but your policy does not cover missed payments.
Can I switch insurance carriers after closing?
Yes. You can shop for new coverage at any time. If your mortgage is escrowed, you must show proof of a new policy to your lender before cancelling the old one. Some carriers charge cancellation fees, so read the fine print.
Do I need insurance for a condominium?
Yes. You should purchase an HO‑6 condo policy to cover the interior of your unit, improvements you make, your belongings and your liability. The condo association’s master policy typically covers the building’s structure and common areas.
What if I rent out a room or part of my home?
Talk to your insurer. Short‑term rentals may require a rider or landlord policy; long‑term tenants could change your occupancy classification and liability exposure.
Final Thoughts: Protect the Home You Worked Hard to Earn
Owning your first home in New England is a milestone worth celebrating. But with that milestone comes the responsibility to protect your investment from fires, storms, code changes, floods, liability claims, and other unforeseen events.
As a new homeowner, you have the power to close coverage gaps. Don’t assume the policy arranged at closing is sufficient. Review your limits, endorsements, and deductibles. Adjust your coverage when you renovate, inventory your possessions, consider adding flood and umbrella policies, and stay informed about local building codes. A brief conversation with your agent before winter could save you thousands of dollars and months of stress.
You worked hard to buy a home. Now make sure it’s fully protected.
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*Disclaimer: We offer content for informational purposes; Co-operative Insurance Companies may not provide all the services or products listed here. Please get in touch with your local agent to learn how we can help with your insurance needs.
Sources
AAA Northeast. 5 Common Home Updates and How They Impact Your Insurance. https://magazine.northeast.aaa.com/daily/money/types-of-home-updates-and-how-they-impact-your-insurance
Agency Checklists. A 10-Year Surge in Residential & Commercial Reconstruction Costs. https://agencychecklists.com/2025/02/24/a-10-year-surge-in-residential-commercial-reconstruction-costs-74566/
Insurance Business Magazine. This problem affects 60% of homeowners policies: Report https://www.insurancebusinessmag.com/us/news/breaking-news/this-problem-affects-60-of-homeowners-policies-report-30377.aspx
Insurance Information Institute. Facts + Statistics: Homeowners and Renters Insurance. https://www.iii.org/fact-statistic/facts-statistics-homeowners-and-renters-insurance
Insurance Information Institute. Jewelry and Other Valuables: How to Make Sure You’re Protected. https://www.iii.org/article/jewelry-and-other-valuables-how-to-make-sure-youre-protected
Insurance Journal. Insurers Continue to Improve Their Home Valuations, Says MSB. https://www.insurancejournal.com/news/national/2013/08/12/301440.htm
The Zebra. Actual Cash Value vs. Replacement Cost.https://www.thezebra.com/homeowners-insurance/guide/actual-cash-value-vs-replacement-cost-value/