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Comparing quotes is the best way to find the optimal policy to match your needs. Follow these steps to begin effectively comparing quotes for yourself.
1. Decide how much coverage you need
Coverage limits may seem ambiguous at first. That’s why it helps to drill down to determine your exact coverage needs.
Start by understanding the value of your home and how much it would cost to rebuild it. Don’t forget about any other structures that may be on your property, like a shed or garage. Then, focus on your personal belongings and assets. How much would it cost to replace the items in your home?
Average replacement costs have risen a cumulative 45% since 2020, according to a recent analysis from the Insurance Information Institute (Triple-I). That’s three times the rate of inflation during the same period. Escalating costs of construction materials and labor drove the increase, according to Triple-I.
Finally, consider coverage types. Replacement cost policies pay to replace your lost or damaged items at home with the exact same materials. But these policies are more expensive. You may also not be able to get a replacement cost policy if you have an older home, because replacing such materials may be impossible.
Actual cash value policies, on the other hand, provide coverage but take depreciation into account. These policies are more affordable, but it means you won’t receive as much in compensation as you would with a replacement cost policy because of the depreciation.
Once you’ve cataloged all your valuables and your home, it’s time to add it all together into a total amount. Calculating current replacement cost is a complex process, so it’s a good idea to work with your insurance agent to determine appropriate coverage levels for your policy.
2. Compare home insurance quotes
Comparing quotes is the most effective way to find the right policy for you at an affordable price. A price-comparison platform allows you to enter a small amount of information specific to you and then compare quotes from several insurers all in one place.
Compare quotes from at least three to five different insurers, and remember the best policy for you may not always be the cheapest one.
3. Find discounts
Different insurers offer a wide array of discount opportunities, including those for bundling, being claims-free, loyalty, making home improvements, and employing safety features in your home.
Some insurers list available discounts on their websites, but others don’t. Do your research, and remember to always ask your prospective insurer or agent what home insurance discounts you may qualify for before you accept the policy. You may qualify for a discount you didn’t know existed.
What home insurance covers
The insurance industry separates homeowners insurance into six individual coverages, labeled with the letters A through F:
Coverage A – Dwelling coverage: Commonly referred to as replacement cost coverage, this pays for damage to the structure of your home.
Coverage B – Other structures: This protects you against loss to unattached structures on your property, such as a detached garage, swimming pool, tool shed, or gazebo.
Coverage C – Personal property: This coverage pays for personal belongings in the home that are affected by the loss, including furniture, appliances, clothing, and electronics. Generally, Coverage C has a lower limit for very valuable items, such as jewelry, firearms, antiques, furs, and the like.
Coverage D – Loss of use: If your home is uninhabitable or parts of the home are unusable after the damage or loss, this coverage will help pay for your additional living expenses from living somewhere else while you rebuild. This typically includes temporary lodging, restaurant meals, moving expenses, and even the additional cost of your commute to work.
Coverage E – Personal liability: This aspect of homeowners insurance will provide coverage if you or another resident of your home are legally responsible for an injury to someone else or property damage.
Coverage F – Medical payments to others: If someone is accidentally injured on your property, this type of coverage will pay for their medical expenses.
In general, you should expect a standard homeowners insurance policy to offer all six types of coverage. But the level of coverage for each and the amount you can expect your insurer to pay in the event of a claim will vary from policy to policy.
Homeowners insurance discounts
Homeowners can take advantage of several discounts to reduce their premium costs. Some available discounts include:
Policy discounts
Multi-policy discounts offer savings on all your insurance policies if you bundle multiple policies, such as home and auto, with the same insurer.
Loyalty discounts can offer you savings if you stick with the same insurer for several years.
A pay-in-full discount will give you a price break if you pay your premium in an annual lump sum rather than monthly. If you have a mortgage, your lender will require you to have an escrow account from which the mortgage company will pay your annual insurance premium.
Identity-based discounts
A married or widowed discount gives you a discounted rate if you’ve tied the knot, or if your spouse has passed away.
A mature homeowners discount rewards the fact that retired homeowners are more likely to be at home during the day, meaning they’re less likely to be burglarized.
Homeowners association discounts provide premium discounts to members of a homeowners association (HOA) since such homeowners are generally subject to high home maintenance standards.
Safety- and security-based discounts
Monitored burglar system discounts help homeowners who install a burglar alarm system lower their rates.
Monitored fire alarm system discounts reward homeowners who have up-to-date smoke alarm systems or other fire alarm systems in their homes.
An impact-resistant roof discount is intended to reward homeowners who live in heavily forested areas or in areas with a high risk of roof damage from windstorms and hail, and who maintain an impact-resistant roof.
Home improvement discounts may make you eligible for savings if you’ve upgraded some aspects of your home. Many states mandate discounts for risk-mitigation measures.
Gated community discounts lower rates for homeowners in a gated community, as they’re likely to face fewer safety threats.
A new-home discount is a benefit for homeowners who buy a new home that’s 100% up to local building codes.
Non-smoker discounts reward people who don’t smoke. Smoking is one of the leading causes of house fires, so insurers offer a discount to nonsmoking policyholders.
Factors that affect your home insurance rates
Several factors can affect your home insurance rates. The most common variables include:
Location: Different locations may have higher or lower risk factors for various types of perils.
Construction type: What your home is built of (wood vs. stone) and how it’s built (flat vs. slope roof) can affect what damage you’re likely to experience.
Replacement cost: If your home’s construction incorporates more expensive building materials, it’ll cost more to replace or rebuild your home.
Liability coverage: The amount of liability coverage you carry can affect your rates. Additionally, if you have additional risk factors for personal liability, such as an aggressive dog or a swimming pool, that could increase your premium costs. An umbrella policy can provide additional liability protection.
Dwelling coverage: The amount of coverage you carry on your dwelling has a direct effect on your rates. Your dwelling coverage limit should be sufficient to cover the replacement cost of your home at current prices for construction materials and labor in your area.
Credit history: The insurance industry considers policyholders with negative credit histories to have a higher risk of making claims, so some insurers will charge more to these policyholders in states where insurers are allowed to consider credit.
Number of claims: Making no claims for several consecutive years can help lower your premiums.
Deductible amount: The deductible you set will help determine your rates. A higher deductible will lead to lower premiums and vice versa. If you live in an area with a high risk of windstorms, your policy may have a separate deductible for named tropical systems.
Homeowners insurance FAQs
Here are answers to some of the most common questions home insurance shoppers are asking.
What company has the cheapest homeowners insurance?
Insurify has found that Commonwealth Casualty offers the cheapest rates for a policy with a $300,000 dwelling coverage limit. The average monthly premium is $77, which comes to an average annual cost of $924. However, Westfield is a regional insurer that offers home insurance coverage in only 10 states.
Is home insurance required?
Though homeowners insurance is not legally required, mortgage lenders typically require borrowers to carry this insurance. And even if you don’t have a mortgage, it’s a good idea to have homeowners insurance for the financial protection it provides.
How much homeowners insurance coverage do you need?
The level of homeowners insurance coverage you need can depend on your financial situation. But it’s a good idea to carry enough coverage to replace your home and your possessions if they were completely destroyed.
Is homeowners insurance tax deductible?
If your home functions as only your primary residence, then your homeowners insurance premiums aren’t tax deductible. But homeowners who run a business out of their home or who have tenants in a home they rent out may be able to deduct a portion of their homeowners insurance as a business expense.
What is the 80% rule in homeowners insurance?
Most insurance companies require policyholders to carry an amount of homeowners insurance equal to at least 80% of the replacement cost of their home in order to qualify for full replacement cost coverage. If your coverage limit is lower than 80% of your home’s replacement cost, your insurer may not pay to repair your dwelling after a partial loss.
Should you get an umbrella policy?
Homeowners insurance provides some liability coverage. But if someone sues you, a homeowners policy will pay only up to the policy limits for any legal judgments against you, and for related attorney’s fees. It’s possible the judgment amount and your legal costs could exceed the liability limits of your homeowners policy. An umbrella policy offers additional financial protection for your assets.
An umbrella policy will kick in when you reach the liability limits for your homeowners, auto, renters, or condo policy. It can also cover you for additional types of claims, such as libel or slander.