(NewsNation) — Buying and owning a home is every American’s dream.

To have that piece of land to call your own, to one day raise a family in, seems like an easy and ideal proposition.

But for first-time buyers, homeowners’ insurance is crucial for protecting their investment and finances.

So, for those new to the possible homeowner group, what do they need to know? What kind of policies are the best and most recommended? What should people look for in a home insurance policy?

What is important about homeowners’ insurance?

Anyone who tries to close on a new home will be required by your lender to purchase a home insurance policy.

Until someone’s home is paid in full, the lender holds claims on the property. People are advised to make sure that the property is insured while they’re paying down their mortgage.

Paying with cash, credit card, or a personal loan may not require people to show proof of home insurance before closing.

“Homeowners insurance may not be legally required, but it’s crucial for financial protection,” said Ilya Shnol, Vice President of Underwriting at Hippo Home Insurance. “Without it, you’d be responsible for covering repairs or rebuilding costs if your home is damaged by fire, storms, or vandalism. It also protects your personal belongings and provides liability coverage in case someone is injured on your property.”

First-time home buyers can sometimes have misconceptions about their home coverage, which could be costly. Oftentimes, when choosing the amount of coverage, several buyers believe the coverage cost will be the same amount as their home purchase.

Which homeowners’ policies are most recommended?

There are several policies and companies that first-time buyers should do their research on to figure out which suits their needs best.

According to the U.S. News and World Report, USAA ranked as the top-rated homeowners insurance company in an analysis of nearly 30 insurers. Behind them were Amica, Allstate, State Farm, Nationwide and Progressive.

“The company consistently earns high customer satisfaction scores, while providing ample coverage options and many discounts to help you save,” the site said of USAA. “It’s also the only company in our rating that includes identity theft coverage and a dwelling/personal property replacement option in its policies.”

First-time buyers when looking for a company or policy should start their research early. They should key in on home insurance reviews, coverage descriptions and explanations of key terms. Individuals can also collaborate with an independent insurance agent or real estate agent for recommendations.

What are the major conditions buyers should look for in homeowner’s insurance?

First-time buyers should have a checklist of what they want when looking into homeowners’ insurance.

For starters, buyers should get pre-approved for a mortgage. This could help to make that person’s offer more appealing to a seller when searching for the right home. A pre-approval will let the seller know you’re a qualified buyer.

In addition, buyers should check the limits on their personal property and liability coverage, making sure the limit is enough to cover everything they own. Being aware of exclusions and determining your deductible is also paramount to the process. Buyers will pay a homeowners’ insurance deductible if it’s necessary to file a claim. A deductible is the amount an insurer will subtract from your claim payout.

Homeowners’ policies are often complex and have difficult language for people to comprehend. To ease that, buyers should focus on four major components — dwelling coverage, personal property coverage, liability protection, and additional living expenses.

A 2013 survey said 60% of homes in the United States are underinsured, plus the average homeowner would need to pay for 17% of rebuilding costs.