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How To Shop For Homeowners Insurance

Sarah Sharkey8-minute read
UPDATED: April 21, 2023

Homeowners insurance gives you the ability to protect the financial investment you are making in your home. Not only will you want to lock in homeowners insurance for your own peace of mind, but your mortgage lender will require this form of insurance before closing on a home.

Let’s explore how to shop for homeowners insurance and find a policy that meets your needs. 

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Factors To Consider When Shopping For Homeowners Insurance

When shopping for homeowners insurance, you’ll need to keep several things in mind. A few of the most important factors include the following:

  • Homeowners insurance company: The right insurance company can make all the difference. Although you may hope to never file a claim, you’ll want to work with a company that has a reputation for doing right by its policyholders.
  • Lender requirements: If you have a mortgage on your home, you’ll need to consider the lender’s requirements when choosing an insurance policy. Most lenders require some level of coverage. But you’ll need to read the fine print of your mortgage paperwork to determine the type of coverage you’ll need for your home. If you aren’t sure of the coverage requirements, speak to your lender.
  • Cost: Homeowners insurance is another cost that shoppers must consider as a part of their home buying budget. Although you’ll likely want to find the cheapest insurance available, it’s important to weigh the cost of the policy with the reputation of the insurance company. In many cases, going with the cheapest coverage option will backfire. Instead, find a policy you can afford with a company you can trust.
  • Coverage: The amount of coverage you need varies based on your unique needs. Some lenders will determine a minimum amount of coverage requirement. But in some cases, you’ll want to carry more coverage than the required amount.
  • Your home and belongings within it: The items in your home can add up to a significant cash value. With that, you’ll need to decide between an actual cash value policy and a replacement cost value policy. In order to get an accurate idea of the value of your belongings, consider creating an inventory of your home.
  • Deductible: The deductible attached to your insurance policy represents the amount you’ll have to pay out of pocket when filing a claim. A higher deductible usually leads to lower insurance costs. Before opting for a high deductible to save on your insurance costs, make sure you can afford to cover the deductible if an unexpected event pushes you to file a claim.

How To Shop For Homeowners Insurance

If you are looking for a step-by-step guide to shopping for homeowners insurance, you are in the right place. Here’s a breakdown of how to properly shop for this important insurance product.

1. Understand Typical Homeowners Insurance Costs And Coverages

According to the National Association of Insurance Commissioners, the average cost of homeowners insurance in 2019 for those insuring a value of $200,000 – $299,999 was $1,114 per year.

But the price of homeowners insurance will vary, since your premium is based on a number of different factors including things like your home’s location, the age of your house, and whether or not you live in a densely populated area. If you live in a geographical area more prone to wildfires or hurricanes, the cost of homeowners insurance might look different for you than it might for someone that lives further from these potential perils.

In addition to cost considerations, there are different coverage types to keep in mind, including actual cash value policies and replacement cost policies.

With an actual cash value policy, the insurer would pay you to replace or restore damaged, lost or stolen items – but they factor in depreciation before giving you any money. This means that whatever property loss you suffered will be reimbursed to you at its current market value, not what you bought the item for originally. Insurance companies have ways of determining a new value to pay you for the items based on how many years of wear and tear the items have been subject to.

On the other hand, with a replacement cost policy, the insurer would pay you the cost to replace whatever property was lost without factoring in depreciation, after you pay the deductible. Essentially, this means that when a piece of your property is damaged or destroyed, your insurance will pay for you to replace it with an item that serves the same purpose and is of comparable quality to the old item.

2. Take Inventory Of Your Home

In order to get the appropriate amount of coverage for your home, you’ll need an accurate inventory of your personal belongings. With this inventory, you `can estimate the total replacement cost for your home. Otherwise, it can be difficult to determine the right coverage limits.

When taking an inventory, comb through each room to capture the items of value. If possible, include a detailed description, price, and a picture of each item in your inventory.

Although this might seem like a time-consuming step, an up-to-date home inventory will come in handy if you need to file a major insurance claim. If your items were destroyed, a detailed inventory may help you finalize a claim for the necessary amount.

3. Research Homeowners Insurance Companies

Not all homeowners insurance companies are created equally. As with all other financial services, some companies are known to provide a better experience than others.

Before making any purchase, it can be a great idea to check social media before buying to get an idea of others’ experiences with the insurance company you’re considering. Reading reviews from other customers can help you decide whether you should trust a company and what the quality of their service will be, should you decide to work with them.

You should also look for customer satisfaction surveys online and any awards the company you’re looking at may have won. Many sites will also compile and rank different insurance companies based on their rates and coverage options, which can be helpful for comparing options as well.

Additionally, scope out what the company has to offer. When looking at what an insurer offers, check to see if they have any available discounts you could take advantage of. Many insurance providers offer discounts for a variety of different reasons, from discounts for homeowners that recently built a new home to home and auto insurance bundle deals. These discounts could be fairly substantial, so it’s worth checking into. According to Insurance.com, some discounts can save you anywhere between 1% – 40% off your annual premium.

Finally, don’t forget to consider the financial strength of an insurance company. You depend on an insurance company to protect your home and belongings, so it’s important that the insurer you choose is a safe and capable choice to trust the value of your property with. Investigating a company’s net worth is certainly not an absolutely necessary step, but making sure your insurer of choice is financially strong doesn’t hurt. Some analytics websites, such as S&P Global, rank and give insight into the financial strength of insurance companies that can help you make a more informed decision.

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4. Get Multiple Insurance Quotes

When you know what kind of policy you are looking for, it’s time to lock in the best price on the market. The only way to know if you are getting the best deal is to get quotes from multiple insurance companies that can help you accurately compare pricing.

Although you can seek out individual quotes on your own, there are many websites that will streamline the process by pulling quotes from multiple insurance companies into a single place.

5. Select A Deductible

A deductible is the amount of money you’ll pay out of pocket when you make a claim. You can typically choose the size of the deductible you want to pay, but keep in mind your deductible amount has an inverse relationship with your homeowners insurance premium. If you choose to pay a smaller deductible for potential claims, your insurance premium will be higher. Likewise, if you pay a higher deductible, your premium will be lower.

Homeowners who want to pay less for their yearly insurance premium may opt for a higher deductible amount, hoping that they won’t have to file any claims. Keep in mind that if you choose this strategy, you might get stuck paying a lot out of pocket, should an emergency come up. If your deductible amount is $1,000, you also likely won’t be filing any smaller claims in order to avoid the expensive fee.

Before choosing a deductible amount, consider your financial situation and how comfortable you are with the risk of potentially paying large deductibles in exchange for a low annual premium – or, conversely, how comfortable you are paying a higher premium in exchange for a cheaper deductible on each claim.

6. Know How To Choose A Homeowners Insurance Policy

Before you move forward with a particular homeowners insurance policy, make sure to read the fine print. If you don’t want to read the fine print, then make sure to work with an insurance agent who you can trust.

When diving into the details, it’s important to understand what your policy does cover. And more importantly, take the time to understand what the policy doesn’t cover. If you are missing certain types of coverage, like flood or hazard insurance, you might have the option to obtain an insurance rider.

Insurance riders, also called endorsements, add-ons or floaters, are optional additions to your homeowners insurance policy that can help you add more coverage if you wish. Some commonly purchased riders include coverage for a business property, building code coverage, water damage coverage (for backed-up sump pump, etc.), and scheduled personal property coverage.

If you read your policy and are unhappy with anything from coverage limits to exclusions, talk to an insurance agent about potentially including riders to supplement your current coverage.

What To Avoid When Shopping for Homeowners Insurance

Although we’ve discussed what to look for while shopping for a policy, there are also a few common pitfalls to avoid.

The first mistake that homeowners tend to make is choosing a policy based on the price point alone. Of course, everyone wants their homeowners insurance policy to make a relatively small impact on their budget. But choosing such an important policy on the basis of price is often a mistake.

Instead of solely looking at the price, look at the insurance company as a whole. Only move forward with a company that you feel comfortable working with. Don’t let a lower price lull you into working with an insurer that is known to offer a terrible claim experience.

Before committing to a policy, make sure to explore all available discount opportunities. Consider any and all discount options, which range from bundling your policies to upgrading your security system.

At the end of each policy term, don’t make the mistake of automatically signing up for another stint with the same insurance company. Instead, take the time to reevaluate your policy needs. If anything about your financial situation has changed, it might be time to make adjustments to your coverage. Plus,  shopping around to compare costs on a regular basis will ensure you never overpay for your insurance needs.

How To Switch Homeowners Insurance

If you ever want to switch your homeowners coverage, you can do so, even if you’re paying through an escrow account. Just make sure to check all the terms and conditions outlined in your current policy – and make sure to start your new policy before you cancel your old one to make sure there is not a point, even briefly, where you don’t have coverage.

The Bottom Line: Shop For The Best Homeowners Insurance Policy For Your Home

Like shopping for a home, choosing a homeowners insurance policy is a big decision. Since this policy protects your home and valuables, it’s critical to shop around for the coverage you need at the price point you can afford.

For prospective homeowners, shopping around for insurance isn’t a decision you should take lightly. If you are preparing to buy a house, apply for a mortgage with Rocket Mortgage®.

Get approved to buy a home.

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Sarah Sharkey

Sarah Sharkey is a personal finance writer who enjoys diving into the details to help readers make savvy financial decisions. She’s covered mortgages, money management, insurance, budgeting, and more. She lives in Florida with her husband and dog. When she's not writing, she's outside exploring the coast. You can connect with her on LinkedIn.