You love your house, and you want to protect it. You’ve considered getting a security system or maybe just hoping your local neighborhood watch keeps an eye on things. But whatever your strategy, don’t forget that homeowners insurance is one of the best ways to protect your home and your bank account.
Your house, after all, is probably the most expensive thing you’ll ever buy. If a tornado, fire or flood or some other natural disaster would come through, your homeowners’ insurance policy might be the only defense you have from being financially wiped out.
So, how can you buy it and make sure you’re getting what you need at a price you can afford?
We will reveal the details on how to shop for home insurance but here are the steps in a nutshell:
- Decide what things you want to insure and how much coverage you will need
- Learn what home insurance discounts are available
- Get everything you need for the insurance policy ready
- Select the best homeowners insurance company for your needs
- Compare quotes
- Buy your homeowners insurance
Ready to learn how to shop for homeowners insurance and why home insurance offers so much protection? Here we go.
Generally, most insurance policies protect five main categories:
- The dwelling or house and other structures on the property
- Personal property – everything in the house, all your valuable stuff
- Liability – If somebody falls down your stairs and sues you for leaving a banana peel on a step (hey, it could happen), your homeowners insurance could protect you from being financially crushed
- Additional living expenses
- Guest medical payments
There’s a lot to think about, though, before you rush to an insurer and buy homeowners insurance. The enthusiasm is admirable, but you want to look carefully at how much coverage you need and which insurance companies have the best deals on that coverage.
If you already have coverage and are shopping around, check out our Home Insurance Advisor tool to see how protected you currently are and if there is room for improvement.
Most insurers require you have at least 80% of your dwelling replacement cost covered. We encourage 100%. You want to make sure that your home is covered so that if it was destroyed, you would receive enough money to replace it and any other structures on the property. That is called replacement cost. But there also may be options for extended replacement cost or guaranteed replacement cost.
Again, replacement cost really just means “this is what it would cost to replace your home at current prices.” Here are a few sites that have a replacement cost calculator to help you determine the replacement cost value of your home:
- Craftsman Building Cost Calculator
- My Bluebook
- Dwelling Cost
You don’t want to have a four-bedroom and three-bath home blown to smithereens, only to learn that your homeowners insurance payout will only be enough to rebuild a two-bedroom and one-bath house.
Extended replacement cost
Extended replacement cost is replacement cost with a twist. If you have an extended replacement cost endorsement on your homeowners insurance policy, your insurer will cover your home’s replacement cost up to a certain percentage even if it exceeds your dwelling coverage limit.
Guaranteed replacement cost
Providing even more coverage than extended replacement cost, guaranteed replacement cost doesn’t specify a percentage limit. With this type of endorsement, you are guaranteed to have the rebuild or repair of your home covered, no matter the cost.
Personal property coverage
Typically, homeowners insurance will pay to replace 50% to 70% of your personal property. With most major insurance companies, you’ll have the option to purchase additional coverage, if needed. You’ll also have the option to buy coverage for valuable items, which are items, like jewelry or collector’s items that may require higher coverage limits.
Keeping an inventory of your personal property will make shopping for home insurance much easier.
Standard home insurance policies include $100,000 of liability coverage. This type of coverage protects you if someone or their property is injured, damaged or destroyed by you or a family member. Liability coverage will help you out, up to your coverage limits, for things like legal costs and court damages, too.
Since it is well known that even a minor accident can turn into a major expense (especially if lawsuits are involved), most experts recommend at least $300,000 in liability coverage.
If you need more liability coverage than the standard home insurance policy offers, there is an option to purchase umbrella insurance for higher coverage limits.
Additional living expenses (ALE)
If your house is taken out by a fire, scary as that sounds, you’re going to need a place to live temporarily. ALE or loss of use coverage would pay for your hotel, your restaurant meals and other costs incurred while you wait for your home to be rebuilt. But as with all coverages, there are coverage limits. Most home insurance policies include 20% of your dwelling coverage in additional living expenses. So, if your dwelling coverage is $300,000, you will have $60,000 in ALE.
Guest medical payments
The typical coverage limits on guest medical payments range from $1,000 to $5,000. Guest medical payments might seem like it overlaps with liability coverage, but it doesn’t. This coverage is aimed at covering medical costs for guests if there is a minor incident, in which case, the fault is not a factor.
Nobody wakes up thinking, “Boy, I really want to buy home insurance today, and someday I hope to file homeowners insurance claims. That’ll be fun.” But what is fun is knowing that you’re covered if the worst happens and that your coverage is affordable.
Most homeowners insurance companies offer a variety of home insurance discounts to help lower costs.
Home insurers hope that you won’t be making too many, if any, homeowners insurance claims in the future, and so the safer or newer your home, the more discounts they’ll give you. That explains why if you buy a new home, the average discount you’ll get is 40%.
If the house you move into is five years old, it’s generally around a 26% discount. Again, these are averages.
You’ll likely see a discount if you bundle your homeowners insurance with the company that gives you your car insurance. You can get discounts for all sorts of things, from upgrading a roof to putting a deadbolt on the front door. Some of these discounts may not be much – like 1% off your price – but they can add up.
Things you might need to get home insurance quotes and policy:
- Age, type and square footage of home
- Security alarm or other safety equipment
- Age of roof
- Age of mechanicals like HVAC, water heater, etc.
- Recent upgrades
- Home fair market value
- Who lives in the home?
- Are there other structures on the property?
- Personal property inventory
- Social security number
- Pets in the home and their breed
You’ll want to have information about your house, and while that sounds logical and easy, that can include information like how many square feet your home is, and not everybody is going to remember that. You may not also remember that upgrade you did two years ago, such as replacing the roof, but if you insurer knows about it, it may be able to lower your premium. You’ll also need to share things like how many people live in your home.
It isn’t only about the price, and in fact, you really need to make sure it’s about more than the price. Instead, look for the best value overall.
Imagine a scenario where you pick the cheapest homeowners insurance you can find. Then a decade passes, and you don’t think to upgrade your policy, and one day, a tree falls into your living room, hurting nobody in this hypothetical but crushing your brand new TV set. According to the Insurance Information Institute, annually, one out of 20 houses will report damage, and so it’s certainly possible that someday you’ll be one of the millions of Americans who file homeowners insurance claims.
So you file your claim, and that’s when you realize that you bought the cheapest insurance policy you could find and that your policy is only going to cover part of the cost to fix your wall, carpet and TV.
So really read through the details on what sort of coverage you’re getting as well as any perks they offer, like paying for a hotel to stay in while your home is being repaired after a fire or tornado.
Start by taking a look at our review of the best home insurance companies in 2021.
Make sure you have requested the same coverages and coverage limits on all quotes. Comparing apples-to-apples is the only way you will be able to determine which insurance company is offering you the best value.
It is a process, and chances are, you’re not going to want to get quotes from a dozen homeowners insurance policies, but do yourself a favor and get at least three. The first quote may seem pretty good, but you don’t want to later realize you could have been paying less for a better policy.
This is the easy part. Once you’ve decided which insurer you want to go with, just let the insurance agent know. They’ll send you a policy to sign, and then you’ll be insured.
Hopefully, you’ll never need homeowners insurance. But if you do someday need to file a homeowners insurance claim, you’ll be thrilled to have the financial protection of your insurance policy.
Frequently asked questions about how to buy homeowners insurance
What should I look for when buying home insurance?
Price is important because you need to be able to afford your home insurance. But what you get for the price matters a lot, too. You don’t want to have something go wrong someday and learn that you aren’t covered for the damage because you went with the cheapest, lowest coverage possible. So the general rule of thumb, with any insurance policy, is to read the fine print and see what’s covered and what isn’t – and then buy the most insurance you can reasonably afford.
Where can I buy homeowners insurance?
You can buy homeowners insurance from just about any insurance company in the country, but some of the major insurers are:
- State Farm
- American Family
- Liberty Mutual
Can I buy homeowners insurance online?
Yes. You may prefer to talk to an agent, but otherwise, you can usually buy homeowners insurance entirely online, without meeting anybody or leaving your home.
Is it a bad idea to buy cheap homeowners insurance?
Cheap homeowners insurance is better than no homeowners insurance, but you do want to be careful about only focusing on the price. The coverage is what’s really important. If you value your home, and having it seriously damaged without having the money to pay for repairs would set you back financially, you want to make sure that you have the best homeowners insurance that you can afford.
Why should I buy homeowners insurance?
You should buy homeowners insurance for the same reason you’d want to buy health insurance, renters insurance, car insurance, pet insurance, earthquake insurance and so on. If something bad happens, and that bad thing could be very expensive – think of a trip to the ER because a neighbor was bitten by your dog and a resulting lawsuit—then you’ll be very glad you have homeowners insurance.
If your basement floods and ruins the carpet, and your homeowners insurance policy pays for that, you’ll be very glad you have homeowners insurance. If… well, we could offer up hypotheticals all day, but you probably get the idea.
The bottom line is that homeowners insurance protects your house, your personal property and protection against liability for accidents that injure other people or damage their property. Homeowners insurance is financial peace of mind