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How to shop for homeowners insurance in 5 steps
Shopping for homeowners insurance may seem like something only new homeowners need to worry about. But with consistently rising home insurance rates, you could be missing out on some serious savings on insurance coverage by sticking with your current insurance company.
Whether you’re a first-time home buyer shopping for a home insurance policy or a seasoned homeowner searching for lower insurance premiums, here’s how to shop for a policy and secure the best rates without skimping on your home insurance coverage.
Learn more: First-time home buyer in 2024: What you need to know
A step-by-step guide: How to shop for home insurance
Use this guide to find and vet companies, secure the best home insurance quotes for your situation, and ensure you have enough coverage.
Step 1: Determine your coverage needs
Before you start shopping, it helps to understand what homeowners insurance covers and what extra coverage you might need to add. The following are the components of a standard policy for home insurance.
Dwelling coverage
This part of homeowners insurance covers property damage up to the replacement cost of your home. Coverage limits are based on factors such as square footage, renovations, the age and type of home, whether you have a detached garage or other structures, and local costs for building materials and labor.
Personal property coverage
Protection for your personal belongings in the event of a natural disaster or theft falls under this component. Most insurance companies only offer the actual cash value of your personal property unless you opt for replacement cost coverage.
Personal liability coverage
Your homeowners insurance policy also covers you in the event of an incident or injury that occurs on your property. Homeowners liability coverage policy limits can range from $100,000 up to $500,000.
Loss of use coverage
If you need to vacate your house during repairs as a result of a home insurance claim, this part of your insurance policy covers the additional living expenses. Some companies set a monetary limit while others have time-frame limits for this type of coverage.
Learn more: What does home insurance not cover?
Step 2: Consider extra coverage
In addition to standard home insurance, you may need add-ons, endorsements, or additional coverage. For instance, depending on where you live, your lender may require flood insurance, which is separate from your homeowners policy.
Here are a few other types of coverage policyholders should consider to reduce out-of-pocket costs and provide better protection.
Extended replacement coverage
Sometimes referred to as inflation guard, this coverage protects against depreciation and covers the difference between your home’s coverage limit and what it would actually cost to replace it due to inflation in building and labor costs.
Scheduled personal property coverage
For high-value items such as artwork, jewelry, and antiques, you may need individual provisions, sometimes called “floaters,” to protect the value of these collectibles.
Service line coverage
This add-on coverage projects against costly damage to the service lines on your property including water and sewer pipes and cables for electricity or other services.
Medical payments coverage
Sometimes referred to as Coverage F, this home insurance add-on pays for less costly medical bills related to injuries that happen on your property, whether you’re liable or not.
Step 3: Get referrals
If you’re new to the whole homeowner thing, choosing a homeowners insurance company can be overwhelming. Especially since it often comes at a time when you’re also knee-deep in paperwork to secure financing for your new home.
One way to find the best homeowners insurance for your situation is to simply ask your mortgage lender and your real estate agent for referrals. They have insider info on which companies offer the lowest home insurance costs in the region and can recommend an independent agent.
Step 4: Research insurers
Not all home insurance companies are created equal. Read reviews online and check with your state’s insurance website or the National Association of Insurance Commissioners to verify the company is a reputable one.
Step 5: Request multiple quotes
To find the best home insurance, the Insurance Information Institute generally recommends securing three different insurance quotes or contacting an independent insurance agent to gather more information.
Once you’ve gathered quotes, pay attention to the specifics as you compare costs. This includes the deductible but also any discounts available for bundling policies, such as with your auto insurance provider. You can also earn discounts by installing safety equipment such as an alarm system or a deadbolt.
How much does homeowners insurance cost?
The cost of homeowners insurance coverage depends on your location, your home’s particulars, and your coverage limits, but can also vary significantly based on personal factors such as your credit score and claims history.
Progressive estimates the average premium for a 12-month policy in their network at anywhere from $999 to $1,655 per year. But a study by Insurance.com puts the average cost of home insurance nationwide at a much higher $2,601 per year, highlighting big variations in the cost between states.
For instance, high-risk areas such as Oklahoma and Kansas in the Midwest, as well as Florida and Colorado with their frequent natural disasters, have home insurance rates of $4,009 to $5,858 per year. New England and Mid-Atlantic states pay significantly lower premiums — anywhere from $613 to $1,384 per year.
Insurance.com’s average cost of $2,601 per year includes $300,000 in dwelling coverage and liability alongside a $1,000 deductible. If you finance your home and have an escrow account, the cost of home insurance is usually part of your monthly mortgage payment.
You bought a policy. Now what?
While homeowners insurance isn’t required by law, by purchasing it you’ve made a financially sound decision that will protect one of your most valuable assets — your home. Make sure you understand whether your premiums are included in your monthly mortgage payment and verify your policy is in effect with your lender.
Set a reminder for this time next year to update your home inventory and make any necessary changes to your coverage. That way, whether a burglar breaks in or a windstorm tears up your roof, you’ll be guaranteed the financial support you need to repair your home and recover your losses.
Learn more: What’s in a mortgage and how does it work?
FAQs
1. Is homeowners insurance included in my mortgage?
Homeowners insurance is not automatically part of your mortgage. However, if you are financing your home, payments for your home insurance premiums are usually rolled into your monthly mortgage payment and paid to your home insurance company out of your escrow account.
For homeowners without an escrow account or financing, home insurance premiums need to be paid separately and are typically due to the insurance company directly on an annual, semi-annual, quarterly, or monthly basis.
2. How much should my home insurance deductible be?
A standard homeowners insurance deductible is usually $1,000, although some insurers offer $500 deductibles. As with most kinds of insurance, home insurance companies generally offer a higher deductible in exchange for a lower monthly or yearly insurance premium.
In some cases, an insurance company will charge a deductible set at 1%-2% of the home’s value. This means if your home is valued at $500,000, your deductible for insurance claims would be $5,000-$10,000.
