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How to buy homeowners insurance

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Your home is likely one of your biggest investments and homeowners insurance is designed to offer financial protection in case of damage or loss to it. Volatile weather, theft, fires or injuries are only a few examples of costly incidents that can become major expenses if you had to cover them out of pocket. The average cost of homeowners insurance is a little over $100 per month for $250,000 in dwelling coverage. While a percentage of your household budget is needed to secure home insurance, it is far less expensive to rebuild your home or replace the contents following an unexpected loss when you purchase the right coverage.

Steps to buying homeowners insurance

Purchasing a homeowners insurance policy is fairly easy. Depending on the home insurance company you choose, you may be able to do everything from start to finish online. Follow these four steps on how to buy home insurance:

1. Take stock of what you are insuring

The first step is to get an idea of what valuables you plan to insure. Besides the home’s structure, homeowners insurance covers your contents inside. 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, weapons and other valuables? Additionally, you’ll want to take stock of the replacement cost of detached structures like a pool, garage, shed or fence.

Take inventory of what you own and a rough estimate of what it is worth. This will help determine how much coverage you will need.

2. Research home insurance companies

Researching home insurance companies offers you several advantages. You can have 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. If you request multiple quotes, you’ll also find which company is offering the most competitive rate based on your personal information. Since rates can vary among companies, you’re likely to save money on premiums by taking this step. Researching providers beforehand can also give you a better feel for the digital experience, such as navigating policy questions online or using a dedicated mobile app.

When researching to find the best home insurance companies for your short list, look for companies with features you like, such as:

  • A mobile app
  • Web access
  • Offers customer support by phone, webchat and/or through local agents
  • Provides customers with a variety of discounts

Check out customer reviews to learn more about how the company handles complaints and claims. J.D. Power releases a study rating the top home insurance companies according to customer satisfaction. In addition, AM Best is a good source of financial strength ratings. Narrow down your list of homeowners insurance companies to three to five insurers for comparison.

3. Get quotes

The same type of home insurance coverage varies in price based on the company and the number of discounts offered. Therefore, it is a smart move to get quotes from different home insurance companies. Getting quotes is free — all it will cost you is time. Grab your list of insurance providers you researched and visit their webpages to get an online quote or call them to speak with a licensed agent.

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

  • Your home’s address
  • Age of your home
  • Square footage of your home
  • Details about your roof type, such as composite or asphalt
  • Your roof’s 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 and would like some guidance in the process, you could call to get a quote from a licensed agent.

4. Buy your home insurance

Once you round up your quotes and decide which homeowners insurance is best for you, buy your home insurance. You will want to review the key coverage details of your policy so that you feel you are properly insured. These details are:

  • Coverage A, Dwelling: This coverage is the calculated cost to rebuild your home. The cost is different from your home’s market value.
  • Coverage B, Other Structures: This coverage is usually 10% of your dwelling amount and covers damage to your detached garage, fences and sheds.
  • Coverage C, Personal Property: It is usually 50% or 75% 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 if your home is uninhabitable due to a covered claim and you must 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. 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 or $5,000 (or more) and covers if a guest injures themself, but you are not legally liable.

Other policy options worth reviewing are your deductible amount, any endorsements you would like added and payment options. If you have a mortgage, you will need to share the details of your mortgage company to 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 have time to review it and make changes. If you approve it, you’ll sign up for the insurance policy based on the dates you choose. Payment is likely due at the time you sign for your coverage to begin, although each insurance company has its own options for payments. On the other hand, if you have a mortgage, your home insurance will be paid through your escrow each month as you pay off your mortgage.

What does homeowners insurance cover?

Standard homeowners insurance policies offer a range of financial protections. This protection extends to both the property itself and your personal belongings. While there may be variations in policies from one insurance company to the next, most standard HO-3 policies cover expenses related to:

  • Rebuilding or replacing the structure of your home due to damage from a covered event
  • Replacement of personal belongings due to damage from a covered peril.
  • Liability protection, if someone visiting your home is injured, including if someone in your household or your pets causes the personal injury.
  • Additional living expenses, if you are required to move out of your home during repairs from a covered event.
  • Financial protection for other structures on your property, such as the fence, shed, detached garages if they are damaged by a covered event.

The covered events, or perils, included in policies are typically fire, wind, hail, smoke, ice, burglary and theft, and possibly others. Keep in mind, standard homeowners policies do not usually include earthquake or flood damage coverage. These coverages require separate endorsements or policies altogether.

Frequently asked questions

Written by
Cynthia Paez Bowman
Personal Finance Contributor
Cynthia Paez Bowman is a former personal finance contributor at Bankrate. She is a finance and business journalist who has been featured in Business Jet Traveler, MSN, CheatSheet.com, Freshome.com and TheSimpleDollar.com.
Edited by
Insurance Editor
Reviewed by
Senior wealth manager, LourdMurray
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