Direct Line has warned homebuyers that more than 20% of them are "falling into a trap" that could cost them £3,500 or more.
The home insurer said this happens because many people accept their mortgage provider's home insurance when arranging their mortgage.
Direct Line says this means they could be paying 30% more than they need to.
It also warned that if people wanted to change insurers they may be faced with a range of penalty charges for doing so.
Up to 1.2m people will take out mortgages this year and could be faced with these problems.
Direct line spokesman Malcolm Cooper advises: "Firstly, check out what your lender's insurance quotation is based on - you could end up paying for more cover than you need - then ask whether and how any penalties such as switching fees are applied.
"Finally, compare this with other well-known alternatives available on the market."
