Buying a home can be an exciting time, and knowing how to choose homeowners insurance is one important part of the homebuying process. Your home is likely to be the most expensive investment you’ve ever made, and adequate coverage can protect you from financial disaster in the event that it is damaged or destroyed. If you are wondering how to shop for home insurance, Bankrate’s guide can help you to understand the steps you should take to find the best and most affordable policy for your purposes.

Key takeaways

  • The average cost of homeowners insurance per year is $1,687 based on a policy with $250,000 in dwelling coverage.
  • A standard policy may not cover all possible risks, so it can be important to explore policy endorsements, or add-ons, that give you more robust coverage, such as insurance for flooding or earthquakes.
  • You may want to shop for new home insurance if you've recently purchased a new home, you need an endorsement your current carrier does not offer or your rates are increasing at renewal.

How to shop for home insurance

Buying homeowners insurance may be simpler than you think. Depending on the home insurance company you choose, you may be able to buy homeowners insurance entirely online. These five steps may be a good starting place if you’re wondering how to buy home insurance and how much coverage you need:

1. Determine what you need to insure

The main coverage on a home insurance policy is the dwelling coverage, or coverage A. Most insurance companies have an estimation tool that may help determine your dwelling coverage needs based on your home’s characteristics, like age, square footage and home style.

Personal property coverage, or coverage C, is a percentage of your dwelling coverage amount, so it’s also typically important to know what it would cost to replace your personal belongings if you experience a total loss on your home.

Taking inventory of what you own and working out a rough estimate of what it is worth may help you determine how much personal property coverage you will need. You might want to consider factors like:

  • Does your home feature many upgrades, such as stainless steel professional kitchen appliances and granite countertops?
  • Does your home have hardwood floors?
  • Do you have jewelry, valuable collectibles, custom furniture and other valuables?

Knowing what valuables you have and their costs may help you determine if you need additional coverage. Home insurance policies can limit coverage on high-value items like jewelry, antiques and fine arts, so you may need to purchase an endorsement to add coverage for these items.

Additionally, you’ll likely want to take stock of the replacement cost of detached structures like a pool, garage, shed or fence. Coverage B, other structures, is also typically a percentage of your dwelling coverage.

2. Research home insurance companies

Researching home insurance companies may offer you several advantages. Your research could give you a clear comparison of the coverage options available and the feature variations from one company to the next. One company may provide more coverage options that you prefer over another. Researching providers beforehand may also give you a better feel for the digital experience a company offers.

When conducting research to find the best home insurance companies for your short list, it may be helpful to look for companies with features that are important to you. These may include:

  • A mobile app
  • Digital claims filing
  • Customer support by phone, webchat and/or through local agents
  • A variety of potential discounts
  • Endorsement options that fit your needs

You can check out customer reviews to learn more about how the company handles complaints and claims. J.D. Power releases a study each year ranking the top home insurance companies according to customer satisfaction. In addition, AM Best issues financial strength ratings. Most insurance professionals recommend you narrow down your list of homeowners insurance companies to three to five insurers for comparison.

3. Explore coverage add-ons

A standard home insurance policy might not meet some homeowners’ needs. Most home insurance policies do not cover earthquake or flood losses. If you live in an area prone to earthquakes or flooding, you may require additional coverage. Some insurers offer earthquake endorsements, but most coverage for earthquakes and flooding is sold as standalone policies. You may also be able to purchase flood insurance through the Federal Emergency Management Agency’s National Flood Insurance Program or through your homeowners insurance company.

Endorsement options vary by carrier, but some of the most common you may want to look for include:

  • Sewer/water backup coverage: This endorsement provides financial protection against damage caused by your drains backing up or your sump pump failing.
  • Identity theft coverage: This may provide funds for legal fees and other costs associated with identity restoration.
  • Business property coverage: Many standard home insurance policies do not cover business property stored at your home. This endorsement may be helpful if you run a home business by increasing coverage limits for inventory and other business property.
  • Scheduled personal property coverage: This endorsement offers additional coverage for specifically listed high-value items like jewelry, antiques or musical instruments.

4. Compare quotes

On average, homeowners pay $1,687 annually for a homeowners insurance policy with $250,000 in dwelling coverage. The same type of home insurance coverage may vary in price based on the company, its discounts and your personal rating factors. Therefore, it may be a smart move to get quotes from different home insurance companies to see which could offer you the lowest rate for your circumstances. Getting quotes is typically free. Once you’ve narrowed down a list of carriers that may meet your insurance needs, you can likely get quotes either online or through an agent.

To get a home insurance quote, you will likely need to provide:

  • Your home’s address
  • Your home’s proximity to a fire department and fire hydrant
  • Age of your home
  • Square footage of your home
  • Details about your roof type and age
  • Number of bathrooms in the home
  • Construction materials, such as floor type, countertop materials and other finishings
  • Type of garage (built-in or detached)
  • Foundation type (basement, slab or crawl space)
  • Security features such as deadbolts or alarm system

Most insurance companies have easy-to-follow online quote tools. If you have any questions or would like some guidance in the process, you could call to get a quote from a licensed agent.

5. Buy your home insurance

Once you round up your quotes and decide the best home insurance company for you, it may be time to buy your policy. You will likely want to review the key coverage details of your policy so that you feel you are properly insured. A standard HO-3 homeowners policy should include:

  • Coverage A, Dwelling: This coverage is the calculated cost to rebuild your home. The cost is different from your home’s market value, which includes the land your home sits on.
  • Coverage B, Other Structures: This coverage is usually 10 percent of your dwelling amount and covers damage to your detached garage, fences, sheds and other structures.
  • Coverage C, Personal Property: This is usually 50 percent or 70 percent of your dwelling coverage limit and covers contents within your home and contents away from your home, like in a storage unit.
  • Coverage D, Loss of Use: This coverage applies to additional costs incurred if your home is uninhabitable due to a covered claim and you must temporarily live elsewhere.
  • Coverage E, Liability: This covers costs related to legal fees and lawsuits you may incur if someone is injured on your property or if you cause damage to someone else’s property and are found legally liable. Different coverage options apply, but usually limits are $100,000, $300,000 or $500,000. Some property insurers may offer higher coverage limits.
  • Coverage F, Medical Payments: This can be set at $1,000, $5,000 or more and covers costs if a guest injures themself in a covered incident, but you are not legally liable.

Other policy aspects that may be worth reviewing are your deductible amount, any endorsements you would like added and payment options. If you have a mortgage, you will likely need to share the details of your mortgage company with your home insurer so that your coverage can be paid through your escrow account.

Once finalized, you will receive a copy of the declarations page and everything your policy covers. You should have time to review it and make changes. If you approve it, your insurance policy will go into effect based on the dates you choose. Payment is likely due at the time you sign for your coverage to begin, although each insurance company may have its own options for payments. On the other hand, if you have a mortgage, your home insurance will likely be paid through your escrow each month as you pay off your mortgage. It is important to keep in mind that any rate changes from your insurance company or policy changes you make that affect your insurance premium will also impact your escrow payment.

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When should I shop for home insurance?

You can shop for home insurance at any time and for any reason. New homebuyers who don’t already have a policy in place likely want to shop as soon as they find a house, so they can take their time to find the best policy and price for their needs.

If you already have a policy in place, it might be a good time to shop for homeowners insurance if:

  • You’re moving to another state or city
  • The rates on your existing home insurance policy are going up
  • Your current insurance company doesn’t offer an endorsement you need
  • Your coverage needs are changing
  • Your policy will renew soon, and you want to see if you can get a better home insurance rate
  • You’ve experienced a significant life event like marriage or a drop in credit score (in applicable states)
  • You want to bundle your home and auto insurance

If you plan to switch homeowners insurance carriers, most insurance professionals recommend you buy your new policy before you cancel your existing policy to ensure there is no gap in coverage.

Frequently asked questions

    • First, it can be helpful to ask for quotes from several carriers so you can compare and see who gives you the best price for comparable coverage. Almost all companies also offer a variety of discounts, and these can save you money on premium costs. Ask your agent what discounts you might qualify for when you apply for your policy, and review them annually in case you become eligible for new ones. Finally, consider whether you want a policy that is based on actual cash value (ACV) or replacement cost value (RCV). ACV coverage is generally cheaper, but may not provide enough coverage to replace your belongings if they are damaged or destroyed.
    • State and federal laws do not require homeowners to purchase home insurance. However, if you finance a house, the lender will likely require you to carry homeowners insurance. If your home is paid off, you do not have to have home insurance. However, most insurance professionals recommend insuring your home even if it is not mandatory — the cost of a homeowners policy is typically much lower than paying for the damage out of pocket should a covered peril occur, especially in a total loss situation.
    • Bundling your home and auto insurance means purchasing both policies from the same carrier. Many companies offer discounts for bundling, and some may even allow you to pay a single deductible for a covered loss that damages both your home and vehicle. To bundle your home and auto insurance, you might start by getting multiple quotes from different companies to see which offers the best rates for both your home and auto insurance needs. This may mean purchasing two new policies, purchasing auto coverage from your current home carrier or vice versa. Once you purchase your new coverage, you can cancel your old policy, ensuring you don’t have a lapse in coverage. Bankrate identified some of the companies offering the best home and auto bundles. These include Allstate, Farmers, Nationwide, State Farm and Travelers.