How To Shop For Homeowners Insurance

Homeowners insurance pays for losses and damage to your home and assets in the case of a disaster. Disasters might include fire, hail damage, theft or accidents.

Homeowners insurance protects the financial investment you make in your home; your lender will require it if you have a mortgage. (Plus, it can help your peace of mind to know that you’re covered if an accident strikes, and that’s worth a lot.)

So, how to shop for homeowners insurance? There’s no “one approach” to shopping for this critical insurance coverage, but you want to ensure you cover all your bases about certain aspects of purchasing homeowners insurance.

If you need homeowners insurance, our guide will help you shop for and find the right policy.

Why Should You Shop Around For Homeowners Insurance?

Why spend so much time reviewing websites and working toward getting the right homeowners insurance? Isn’t the homeowners insurance your neighbor or brother-in-law purchased just fine for you, too? Well, maybe not.

Simply put, shopping around for the best homeowners insurance company and most appropriate policy can help you get the best deal and coverage for your situation. You can find a lower rate and lock the right coverage you need for your home and belongings.

We’ll take a closer look at how to do it (and simplify the process) in the next sections.

Factors To Consider When Shopping For Homeowners Insurance

It can seem overwhelming to look for something as complex as homeowners insurance. However, it’s easier when you drill down into the important parts. When shopping for homeowners insurance, consider a few very important factors:

• Cost: One of the most important things to zero in on when you shop for home insurance is the cost. How much will the premiums cost you? Premiums are the price you pay to purchase home insurance monthly. How much will you pay for the deductible? A deductible is the amount you’ll pay out of pocket when you make a claim.
• Coverage: Insurance companies have various coverage types, including cash value and replacement cost policies.
• Lender requirements: The lender will have certain requirements when choosing an insurance policy. In some cases, lenders will require a borrower to carry enough insurance to pay off the full balance of the loan. Many insurance experts recommend buying enough coverage to rebuild the home. Read the fine print of your mortgage paperwork to determine the type of coverage you'll need for your home. Your lender will give you more details about the type of coverage you need.
• Company: Research insurance companies, including customer service. Check social media before purchasing to understand others' experiences with a particular insurance company. Look at customer service satisfaction surveys, awards, rankings based on rates and coverage options and available discounts.
• Deductible: When you make a claim, you pay a deductible. Consider in advance how much of a deductible you'd prefer to pay if something does happen. That way, you won't pay what you believe is "too much" for a premium, nor will you become overwhelmed if you do have to pay a deductible amount.
• Your home and its belongings: The "right" amount of home insurance will cover your home and your belongings. An inventory can help you iron out the total replacement cost for your home. Consider putting together a detailed description, price and picture of each item in inventory. An up-to-date home inventory of all of your possessions and their amounts will help you if you need to file an insurance claim.
• Where you live: Your location may affect the cost of homeowners insurance. You may also pay more for homeowners insurance if you live in an area prone to weather events like wildfires or hurricanes.

How To Buy Homeowners Insurance In 7 Steps

Now that you have a list of factors to consider, we'll walk through the actual purchase steps. Here's how to buy homeowners insurance:

1. Know The Costs

The average cost of homeowners insurance is $1,428 per year for $250,000 in dwelling coverage. However, homeowners insurance costs vary depending on your home's location, your home's age, whether or not you live in a densely populated area and other factors.

2. Consider All Coverage Types

Consider all homeowners insurance policy coverage types, including standard coverages, add-ons and various levels of coverage, explained below:

Standard Coverages

Standard coverages include: 

• Dwelling coverage: Dwelling coverage is insurance that repairs or replaces your house completely if damage occurs. Dwelling coverage only covers your house, not your property.
• Personal property coverage: Personal property coverage covers repairs or replacement if your personal property becomes damaged, including the belongings in your home – electronics, furniture, decor, kitchen appliances, clothing and more. This is where a home inventory checklist comes into play so you know your items if you need to make a claim. Personal property typically covers half to 70% of your dwelling coverage amount.
• Additional living expenses (ALE) coverage: ALE coverage covers additional living expenses if you can no longer live in your home due to loss or damage and must live elsewhere while repairs occur. It can cover living in a hotel or rental property, meals and pet boarding.
• Personal liability coverage: If you're responsible for damage or injury to others, personal liability coverage as part of your homeowners insurance may cover you. For example, if someone trips on your flagstone sidewalk and hurts themselves, personal liability coverage may cover their medical bills.

Add-Ons

Standard coverages might not be enough for your home. Additional coverages, or add-ons, may be necessary and include:

• Other structures coverage: "Other structures" covers unattached structures, like barns, garages, fences, sheds and other structures not "hooked" to your primary home, where you eat and sleep.
• Flood and earthquake coverage: Flood and earthquake coverage is just what it sounds like – coverage if you are at risk for either one of those perils in your area. A standard homeowners insurance doesn't cover flood or earthquake insurance, so you must shop for those separately. If you live in a high-risk flood area or are prone to earthquakes, consider getting these types of protection.
• Hazard coverage: Hazard coverage is not a separate homeowners insurance purchase. It's already part of homeowners insurance, but it's the portion that protects you against several natural disasters.

Levels Of Coverage

Don't forget to look at the different levels of coverage available for these policies. Levels of coverage can also affect your decision – you don't want to shortchange yourself, particularly when expecting to replace all your belongings at cost if you experience a burglary.

• Actual cash value: An actual cash value policy means an insurer pays you to replace or restore damaged, lost or stolen items, but with depreciation of the objects factored in at the current market value.
• Replacement cost value: A replacement cost policy means that insurers pay you the cost to replace property lost without factoring in depreciation, meaning that you can get an item comparable to the damaged item.
• Extended replacement cost value: When you need more coverage to pay for costs that exceed your dwelling coverage, extended replacement cost value comes into play. Extended replacement cost coverage caps the additional coverage at a certain percentage, like 15% of your dwelling limit.
• Guaranteed replacement cost value: Guaranteed replacement cost value coverage, unlike extended replacement cost coverage, covers every penny of rebuilding your home, no matter what. Note that guaranteed replacement cost coverage will likely cost more than extended replacement cost coverage.

3. Take Inventory Of Your Home

Getting the appropriate amount of coverage for your home begins by taking an inventory of your personal belongings. Consider taking photos and putting together lists to inventory the valuable items you have in your home.

Write down the description and price so that if your items are destroyed, your inventory may help you and your insurance company zero in on the right replacement amount in your insurance claim. You won't have to fiddle to look up prices of objects you purchased over 10 years ago, either – they'll be right there when you need them.

4. Research Companies

Research homeowners insurance companies and don't limit yourself to just one. Read through information about various homeowners insurance companies – shoot for at  least three insurers, though you can research more for peace of mind. Look into:

• The company’s social media presence
• Online reviews and surveys from customers
• General offerings
• Discounts the company offers
• The company’s financial strength

5. Get Several Quotes

Just as you shouldn't just review one type of insurance review online, you shouldn't get just one quote from one insurance company. As soon as you've honed in on the kind of policy you want, lock in the best price on the market. Get quotes from multiple insurance companies to help you compare pricing. Many websites can streamline the process by pulling quotes from various insurance companies and summarizing your options.

6. Select A Deductible

You can typically choose the size of the deductible, but paying a smaller deductible means your insurance premium may be higher. Conversely, your premium will likely be lower if you pay a higher deductible. Consider your financial situation before you choose a deductible amount, and your comfort level with paying a higher or lower deductible should the unthinkable happen.

7. Choose A Policy

Next, speak with an insurance agent to customize a policy and choose a plan that best fits your needs. An insurance agent should be candid with you and answer all your questions about policies, claims processes and other factors that affect your policy. Listening to an agent can also clue you in on the experience you may have down the road with that particular insurer, though it's not always guaranteed.

Read the fine print before you move forward with a particular homeowners insurance policy. Understand what your policy does and does not cover. If you've got earthquake insurance and you live near a fault line, you may have the option to obtain an insurance rider (also called an endorsement, add-on or floater). Some commonly purchased riders include coverage for a business property, building code coverage, water damage coverage and scheduled personal property coverage.

An insurance agent can help you choose between different riders and supplements to your current coverage. If you're honest about your coverage needs and concerns, an agent can better serve you.

How To Shop For Homeowners Insurance: FAQs

Let's look at a few frequently asked questions about shopping for homeowners insurance in case you still have questions about how to shop for it.

When should I start shopping for homeowners insurance?

Lenders usually want to see you buy homeowners insurance before the loan closes. They want to ensure that prior to moving into your home, you keep your purchase secure for both them – and you.

How many quotes should I get for homeowners insurance?

Whether you plan to shop around on your own for a homeowners insurance policy or work with an agent, consider getting at least three quotes. That way, you can rest assured that you're getting the best deal you can find for your situation.

Does shopping for homeowners insurance affect my credit score?

No, shopping for homeowners insurance doesn't affect your credit score. Homeowners insurance companies must calculate the risk they take in insuring you, and to do this, they check your credit history. Most insurance companies do soft pulls, which does not affect your credit. 

What are some mistakes to avoid when shopping for homeowners insurance?

This article discusses what to look for when shopping for a policy, but it's a good idea to avoid some common pitfalls:

• Cheap price: Many homeowners choose a policy based on price alone. However, it can be a mistake because, for example, the insurance company might not have great customer service. A lower price could pull you into working with an insurer that offers a terrible claims experience.
• Discounts: Don't forget to explore discount opportunities. Check all discount options, which range from bundling your existing policies to upgrading your security system. It's easy to overlook this part of how to shop for home insurance.
• Not shopping around the second time: Don't automatically sign up with the same insurer again when your policy expires. You may need to adjust your coverage if your financial situation changes. Shopping around again can also ensure that you don't pay too much for your insurance policy.

Can I switch homeowners insurance after I buy it?

The Bottom Line

Like looking for the right home, choosing a homeowners insurance policy deserves a lot of shopping around. Since this policy protects your home and valuables, it's important to shop around for the price point you can afford and secure the right coverage. 

Consider cost (and note that where you live affects your costs), coverage, lender requirements, details about the company itself, deductible costs, your home and its belongings. Also consider all coverage types – standard coverages, add-ons and levels of coverage prior to deciding.