How to Shop for Homeowners Insurance



Home buying demands so many decisions. You need to figure out where you want to purchase your new home, what real estate agent to use, who will inspect it and what they need to inspect—everything, including the kitchen sink! It may be tempting to relax when it comes to choosing home insurance. However, it’s a crucial decision too—one that can potentially cost you more money than it should.

Following a few simple steps, you can shop for homeowners insurance smartly and save a lot in the process. Dedicating time to finding the best insurance policy for your unique situation may be the best decision you can make.

Compare At Least 3 Different Companies

Since homeowners insurance policies are usually required for a mortgage approval, you may be tempted to save time by signing up with the first insurance company you see. Financial experts discourage this. They recommend getting at least three different quotes on policies for your insurance needs.

To compare policies, look at the different coverage offerings for your dwelling as well as any bundled contents insurance. Determine if the quote includes coverage for personal expenses, such as a hotel room should you have a “loss of use” of your home. See if the quoted policy covers medical bills and what the details are regarding personal liability.

By understanding what each plan does and does not cover, you’ll be better equipped to compare the bottom lines and make a smart choice. Reading online reviews will also give you a good idea of each company’s customer service reputation, which is important if you ever need it.

Determine Your Coverage Requirements

You don’t want to be one of the 60 percent of Americans who are under insured. To determine the right amount of coverage for your situation, you’ll first have to know how much it would cost to rebuild your home. This has more to do with materials and labor costs and less to do with market value. Use a free online calculator to help.

Then, you’ll need to figure out the value of your personal items. Create a list of your possessions and estimate replacement costs. If you have special expensive items like jewelry, you may want to consider additional contents coverage.

Finally, consider your risk level when picking an appropriate level of personal liability coverage. The coverage can cover legal fees or medical bills. If your home will be a social gathering place, or if you have a large breed dog, it makes sense to further protect yourself. Also, homes in flood zones may require additional coverage.

Consider a Higher Deductible

New homeowners often try to save money by increasing the amount they must pay before their homeowners insurance coverage kicks in. High-deductible policies usually have lower premiums. In order for this to benefit you, it’s crucial that you have a solid emergency savings fund that can cover the entire deductible. A high deductible to save on payments won’t help if it clears out your bank account.

The average homeowner makes a claim once every nine years. If you have the savings to pay a high deductible, it could make sense to increase that initial out-of-pocket payment. Do the math to see how much you will save annually to determine if this option makes sense for you.

Ask for Other Discounts

When you’re shopping for home insurance, start with companies that already service your other policies. Many auto insurance agencies offer discounts for multiple policies. If you plan to install an alarm system in your home, you may be eligible for additional discounts. Finally, if you are over the age of 50, many companies reward you with a lower monthly rate. It never hurts to ask when requesting and comparing quotes.

Once you purchase the best homeowners insurance policy, it’s important to plan for this annual or semi-annual bill. For many new homeowners, home insurance payments will be rolled into escrow payments.

Regularly scheduled escrow payments allow you to split the insurance bill into smaller payments throughout the year, which may be easier on your household budget. If your lender does not offer an escrow payment option, be sure to budget and save throughout the year so you aren’t caught in the red for this critical coverage.

Homeowners insurance may seem like just a minor detail in the experience of buying a new home. A good policy, however, can be the difference between feeling secure in your home or being caught out in an emergency. You should take every precaution prevent the latter from happening.