Homeowners Insurance Buyer's Guide

Table of Contents
Homeowners insurance is a necessity, especially if you have a mortgage. It safeguards your home and property against destruction, and practically all mortgage companies require it for a fair valuation of your home. Without home insurance, you can’t access loans or carry out real estate transactions that use the property as collateral.
Most property owners also require renter’s insurance coverage for their tenants. Even if your mortgage lender or landlord doesn’t require you to maintain insurance coverage, it’s always best to have the protection that comes with it.
While some people prefer to stick with their current insurer, it’s a good idea to look for better insurance rates periodically. With premiums on the rise, it may be the best time to consider other suitable companies that will charge you less for the same benefits.
With dozens of home insurance carriers to choose from, it can be hard to select the right option for your needs. The ideal approach when searching for a good fit is to understand the trends that affect the cost of home insurance coverage.
You might think that home insurance premiums are based on home prices, but that’s not the case. Insurance companies determine the cost of insuring your home based on the estimated cost of repairing it or replacing stolen valuables. That means the recent inflation in real estate prices across the country won’t factor into the cost of your home insurance coverage. Trends that do affect home insurance costs include natural disasters (sometimes called catastrophes), pandemic-related housing shortages, and increases in compensation claims.
This guide will provide the help you need in getting the ideal home insurance coverage.
Homeowners insurance is a means of protecting against events that could damage your home or property, or lower its value. Since your home is among your most significant assets, finding a policy that will indemnify you in the event of a natural disaster, an accident, or theft is in your best interests.
Homeowners insurance is recommended for anyone who has recently purchased a home, has a loan that uses the property as collateral, or owns a home outright and wants to protect the property. Getting a suitable home insurance policy for your home is an important financial decision, particularly if you are likely to find yourself in a scenario you can’t control.
There are a few factors that could exclude an individual from needing to purchase homeowners insurance. Homeowners insurance is not for people who:
Insurance companies make a profit by taking in more money than they pay out, which means more policy payments and fewer claims. Customers have a variety of companies to purchase insurance from and will get different price quotes depending on the factors noted in the introduction section above.
Insurance agencies offer their products through independent agencies, exclusive agencies, or direct market sales. Independent agents represent several insurance companies and frequently offer varying quotes for different companies. Exclusive agencies represent one company and can only offer the packages provided by that one insurer. Direct market sales are offered through the mail, by telephone, or online.
A homeowners insurance policy must clearly state the rights and responsibilities of both you and your insurer. To get the most out of your policy, you should:
To find a comprehensive home insurance policy, you need to know why, when, and how to take specific actions. Here are some pointers:
Your insurance agent can help you decide on the coverage to purchase when getting your home insured. It’s important to note that your dwelling coverage needs to be at least 80% of the total cost of replacing and repairing your home. Your agent should also tell you if the policy is based on replacement cost or actual cash value (ACV) and explain the differences in detail.
Insurance agencies calculate the limit of coverage for personal property, for other structures, and for the loss of use of your home as a percentage of your dwelling limit. For instance, if your insurance company sets your property coverage limit at 50% and your dwelling coverage limit is $100,000, then the limit for your property coverage would be $50,000.
If incident occurs that damages your home and property, call your insurance agent as soon as possible. Your agent will tell you whether to contact a local contractor for a repair estimate (to determine if the cost of repair is less than your deductible) or begin filing a claim with your insurance company.
Before filing a claim, be certain that your policy covers the type of loss you have sustained. That’s because your claims will be reported to nationwide databases and may affect your premium rates in the future.
Get all of the necessary documents you will need to support your claim. A claims adjuster will be assigned to you to assess the damage and approximate the payment you are due. If any disagreements arise between you and your insurer, try to resolve them with the company first. Contact your state insurance department if you have any questions or concerns about the adjuster assigned to you.
Your insurance agency could choose to cancel your homeowners insurance policy or not renew it. There’s a big difference between the two:
The best way to start your journey to ideal home insurance coverage is to see if your state insurance department publishes insurance carrier claim handling rates. For residents of Florida, for instance, the Florida Office of Insurance Regulation platform is a great place to begin comparing insurance carriers.
Several things could reduce your chances of receiving the best deal:
What you say to an insurance agent or adjuster could lead to delayed or rejected claims. Here are some things you should avoid saying when speaking to your insurance company:
The cheapest insurance option will likely leave your home uninsured for certain risks. This could mean you’ll miss out on payments after disastrous incidents. A cheap but adequate homeowners insurance policy could be priced between $800 and $1,100 a year for a $250,000 dwelling.
The most popular options are often fairly priced, but they may not offer the coverage you need or be too expensive for your insurance budget. For instance, a popular home insurance policy for a $250,000 dwelling could be priced at around $1,200 per year.
The broadest protection is guaranteed through comprehensive policies. These sometimes bundle auto insurance and home insurance, with discounts. While the average cost of homeowners insurance in the U.S. is approximately $1,585 per year, a comprehensive homeowners insurance policy could cost between $1,400 and $2,600 for a $250,000 dwelling.
It’s important to remember that homeowners insurance premiums vary based on the location of the property and are adjusted periodically by insurers. The ideal choice should fall within your budget limits while providing sufficiently comprehensive coverage for the most imminent risks to your home and property.
Check with your state insurance department for residual market mechanisms like wind pools or FAIR Plans. If your state insurance department doesn’t have any residual market mechanisms, ask if any market assistance programs are available.
Homeowners insurance covers any peril to your dwelling and property, whereas renters insurance covers your personal belongings from damage or theft, as well as any damage you might do to the landlord’s property while you’re a tenant.
The 80% rule allows the insurance company to reduce a claim payment if your dwelling coverage drops below 80% of the total cost of repairing or replacing your home.
While all homeowners should carry a comprehensive homeowners insurance policy on their house, getting the right coverage can be easier said than done. Before buying a policy you should consider the quality of a potential insurer’s customer service, the company’s financial stability, and its customer reviews.
While it might be tedious, doing some research can pay off by ensuring you have the best policy in case of an incident. The average annual cost of home insurance varies depending on several factors. If you follow the guidelines we’ve provided, you can be sure of finding a policy that satisfies your needs.
If you need more information on homeowners insurance, visit:
You can also get a free annual credit report at annualcreditreport.com or by calling 877-322-8228.