3 Reasons Why New Homes Are Less Expensive to Insure Than Resale Homes

The January 2025 wildfires in Southern California devastated the region and become one of the nation’s most severe natural disasters in recent history. The fires also once again highlighted the growing concerns surrounding home insurance costs, particularly in high-risk areas.

“We explored the fires’ far-reaching impact, coming up with ten implications. Two of these 10 implications were directly related to homeowners' insurance,” Ali Wolf, Chief Economist for Zonda Economics, says in a recent report.

As insurers reassess their risk models and adjust premiums accordingly, one consistent trend remains: new homes are significantly less expensive to insure than resale homes. 

According to proprietary data from Hippo Insurance, premiums for existing homes were, on average, 53.9% higher than those for new homes in 2024.

The Cost Difference: Insurance for New vs. Resale Homes

On a price-per-square-foot (PSF) basis, Hippo’s data reveals that the insurance premium for a new home is significantly lower than for an older home. Nationally, the difference is about $0.33 PSF, translating to an additional $599.68 annually for an 1,800-square-foot home. In California, where the wildfire risk is particularly high, the disparity is even greater. 

“Existing home premiums were 99.2% higher than new homes, an additional $0.50 PSF, or $906.12 for an 1,800 sq. ft. home,” says Wolf.

Why do New Homes Cost Less to Insure?

Several factors contribute to the lower insurance premiums for new homes:

1. Modern Building Codes & Resilient Materials

“New construction homes have less risk of a major claim,” says Mike Plata, a commercial/small business insurance representative for State Farm.

New homes adhere to the latest building codes, ensuring better resistance to environmental hazards. They are often constructed with fire-resistant materials, advanced roofing systems, and reinforced structural elements that reduce damage risks, leading to lower insurance costs. 

“With older homes, you run into things such as water loss from an outdated plumbing system, fire from outdated electrical, or a roof claim due to an old roof,” Plata says. Outdated systems and increased likelihood of costly repairs or claims often lead to higher insurance premiums.

“The 2025 wildfires have just served to highlight the urgent need for resilient housing and more solutions to the affordability challenges facing both the housing and insurance industries,” says Wolf.

2. Stricter Regulations & Energy Efficiency

New construction is subject to stricter regulations, requiring builders to implement energy-efficient and disaster-resistant features. These improvements, such as impact-resistant windows and better insulation, lower utility costs and decrease the likelihood of insurance claims.

For instance, many new homes are equipped with high-efficiency HVAC systems, smart thermostats, better insulation, and even leak detection sensors, all contributing to lower energy consumption and reduced risks of system malfunctions that could lead to damage claims.

This even comes into play regarding regional risk factors, such as weather patterns or natural disasters. Insurance rates are typically higher in areas prone to wildfires, hurricanes, or flooding. However, newly built homes in these regions often receive lower insurance rates than older homes because they incorporate modern construction techniques and safety measures that reduce potential damage.

For example, in states with high wildfire risk, new homes may be built with fire-resistant siding, ember-resistant vents, and defensible landscaping, making them less susceptible to damage and lowering insurance costs compared to older homes that lack these protections.

3. Fewer Structural and Maintenance Issues

As Plata points out, older homes often have aging infrastructure, such as outdated plumbing and electrical systems, which can increase the risk of water damage, fires, or structural failures. New homes, being free from these issues, present lower risks to insurers, resulting in lower premiums.

Many older homes were built before modern safety codes were in place, meaning they may have outdated wiring, fewer circuit breakers, or materials that pose a fire hazard. Older pipes made of materials like galvanized steel are more prone to corrosion and leaks. Worn-out shingles, leaks, and structural weaknesses increase the risk of water damage, particularly in extreme weather. Older homes might also have been built with outdated construction methods, making them more susceptible to damage from earthquakes, floods, or strong winds. 

Advanced framing techniques, reinforced foundations, and modern plumbing systems reduce the risk of issues like water damage, structural failure, or electrical fires. Because these features make homes more resilient, insurers offer lower premiums as the likelihood of major claims decreases.

"New home premiums were lower in California than the national average ($0.51 vs. $0.62), reflecting the state’s stricter building regulations," says Wolf.

The Future of Home Insurance & Housing Affordability

As climate change and natural disasters continue to shape the housing market, the importance of resilient home construction is becoming increasingly evident. Homebuyers who invest in newly built homes benefit from reduced insurance premiums and enhanced safety features. Additionally, as insurance companies adjust their risk models, the gap between new and resale home insurance costs may continue to widen.

For prospective buyers, understanding these cost differences can help in making informed financial decisions. Opting for a newly built home not only offers savings on insurance but also provides long-term benefits in terms of durability, efficiency, and peace of mind.