6 Things To Consider Before Getting Homeowners Insurance
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UPDATED: Mar 16, 2021
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If you’re shopping around for homeowners insurance quotes, odds are you’re financing your home through a bank or lender.
Regardless of whether you need to or have to buy homeowners insurance, you want it. This type of insurance is protecting what could be your most valuable asset.
These are the best homeowners insurance companies to protect your investment.
We have decades of experience insurance, and in homeowners in particular our team has done more than 600 hours of research. A home is something you want to protect with the highest level of coverage you can comfortably afford.
Think carefully about your options and read your policy declarations thoroughly before committing to anyone coverage or carrier.
The better informed you are about what is and isn’t covered, the less stressful it will be to file a claim if you ever need to.
6 Things To Keep In Mind While Shopping For Homeowners Insurance
1 – Know The Value Of Your Home
Several factors determine the cost of homeowner’s insurance premiums, the main one is the market value of your home.
And how is the market value of your home determined?
Well, most consumers choose to hire a professional appraiser for the job.
Others, however, choose to do it themselves by assessing similar properties in their vicinity being sold at market value.
Factors that affect the market value of a home include:
- Location – That could include the age of the neighborhood, the proximity to schools and city centers, proximity to fire stations and emergency services, or proximity to a high-risk area.
- Desirability Quotient – The number of homes sold in your neighborhood versus the number of people buying or looking to buy property in the area.
- Exterior Conditions – That includes the architectural style of the home, its curb appeal, condition, size (including land), type of sewage system, the condition of the roads and sidewalks, etc.
- Interior Conditions – The number of rooms, the condition of the appliances, the quality of the construction, etc.
These factors directly affect your homeowner’s insurance premiums.
If you’ve recently remodeled your home, updated its major systems, done landscaping, upgraded security systems or installed additional sensors and detectors, the value of your home may have increased.
Similarly, damages to the home, whether major or cosmetic, adversely affect its market value.
When narrowing down on a similar home, look for the following:
- Nearby location
- Same age
- Similar plot or lot size
- Similar square footage
- Condition of the home
- Number of bedrooms
- Number of bathrooms
- Garage space
- Other structures
If you need help determining the estimated market value of your home or don’t know where to start, Zillow.com offers Zestimates, which can be a great starting point for those interested in knowing what their homes might be worth in the current market.
2 – Choose The Right Kind Of Coverage
Yes! You’ve determined the market value of your home!
The next step should be to look for coverages that will provide a high enough benefit amount to cover the cost of rebuilding the home’s primary structure or dwelling in the event it’s damaged or destroyed.
Standard Coverages Include:
- Dwelling Protection
- Other Structures
- Personal Property
- Additional Living Expenses
- Personal Liability
Additional Coverages Include:
- Dwelling Replacement Cost Coverage
- Personal Property Replacement Cost Coverage
- Scheduled Personal Property Coverage
- Inflation Protection
- Home Business Coverage
- Identity Theft
- Water Back-up Coverage
- Flood Insurance
- Earthquake Insurance
For a more in-depth description of each coverage type, click here.
Purchasing additional coverages or riders will increase your premium payments, yet these add-ons could mean the difference between your claim being approved and having to shoulder expensive repairs on your own.
If you live in an area prone to flooding, hurricanes, earthquakes or wildfires, seriously consider these risks and insure your property accordingly.
3 – Choose The Right Coverage Amount
Another important factor to keep in mind is the type of replacement cost policy you opt for, whether it covers the entire cost of rebuilding your home or only the property’s actual cash value.
Actual Cash Value Policies insure your home and belongings for their market value.
That means a percentage of the value of the property will be deducted over the years to account for depreciation.
Replacement Cost Policies cover the cost of rebuilding or repairing your home and possessions without accounting for depreciation.
That means your home will be rebuilt using materials of like kind and quality.
Guaranteed/Extended Replacement Cost Policies offer the highest level of coverage, ensuring you’ll receive whatever amount is needed to rebuild your home, regardless of shortage of materials or other situations.
That means policyholders may receive a benefit amount that exceeds policy limits with this type of coverage.
If you’re still unsure of which type of coverage is right for you, calculate the costs of potential damages to your home.
If you live in a hurricane-prone area, for example, look into the cost of repairing or replacing your roof with construction materials of similar kind and quality.
If you live in a floodplain, know how much you’d have pay to replace your furniture, appliances, home systems, and belongings after a flood.
Again, evaluate the risks, weigh the pros and cons of higher premium payments, and insure your property accordingly.
4 – Create An Inventory
Create an inventory of all your belongings, especially electronic equipment such as computers, tablets, televisions, monitors, and cameras.
Anything you own that is valuable should also be included, such as items of clothing and shoes.
Items like jewelry, art, musical instruments, and collectibles may require additional protection through an endorsement that will provide you with their full replacement cost in the event of a covered loss.
Know that items stored in a storage unit away from the home may also be covered under your homeowners insurance policy.
Read your policy declarations to make sure which perils are covered.
To create an inventory:
- Scan all receipts of major purchases and upload them to the cloud
- Take photos or video clips of valuables and personal effects
- Use an inventory app to keep track of all your belongings
- Create a spreadsheet with the value of each item at the time of purchase
Remember to update your inventory every year or as often as you feel is necessary, especially if you live in a high-risk area.
If you live in a hurricane-prone area, for example, take inventory of your valuable belongings before each hurricane season.
5 – Reduce Risks
To save on homeowners insurance premiums, minimize what insurance companies would deem as risks.
Perceived risk factors that may increase your homeowners insurance premiums include:
- Wood-Burning Stoves
- “Aggressive” Dog Breeds
- Lack of home safety features
- Lack of alarms and smoke detectors
- Your roof’s construction materials
- Remodeling (increased property value)
6 – Shop Around
Keep in mind that homeowners insurance is a product you should update every few years.
New products (and probably new questions) will arise.
Even if you choose a basic coverage, to begin with, a couple of years down the road you may want to shop around to get a better deal, especially if you’ve made safety and security updates to the house or done some remodeling.
If you want to find out more about ways to obtain the best homeowners insurance rates, take a look at our article and remember the above pointers.
Reducing risks around the home could save you a considerable chunk of money.