How to Buy Homeowners Insurance

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Buying a home may be one of the most important decisions in your life. It’s a big investment — the median home value in the U.S. is $248,857. Protecting your investment should be a top priority. Homeowners insurance will pay to rebuild your home if the structure or contents are damaged or lost.

The average cost of a home insurance claim due to fire or lightning is over $79,000. Water damage claims from a burst pipe or broken water heater average $10,849. Even if your home is paid in full and you’re not required to have homeowners insurance, a policy could save you considerable money if something goes wrong. Follow these steps on how to buy homeowners insurance to protect your asset.

Steps to buy 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’re 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 such as diamonds and watches that are worth thousands of dollars?

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

2. Research home insurance companies

There are plenty of options out there to insure your home. It can be overwhelming to know which insurance company to choose. If you currently have car insurance, consider getting a home insurance quote from your car insurer — you’ll likely get a good discount for bundling your insurance policies.

When looking at other insurance companies to create a shortlist, 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, the Better Business Bureau and Trustpilot are good sources of customer reviews. Narrow down your list of home insurance companies to three to five insurers for comparison.

3. Get quotes

The same type of home insurance can vary in price based on the company and the number of discounts it provides. Therefore, it’s a smart move to get quotes for the same type of policy from different home insurance companies. Getting quotes is free — all it will cost you is some time. Grab your shortlist of insurance providers you did some research on and visit their webpages to get an online quote.

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

  • Your home’s address
  • Age of your home
  • Square footage of your home
  • The estimated value of your building/structure (some online quote tools can estimate your home’s value automatically)
  • The estimated value of your contents
  • Details about your roof type, such as composite or asphalt and age
  • Security features such as deadbolts or alarm system
  • Details about previous claims you filed
  • Whether you’d like to insure your home for actual cash value (current cost minus depreciation based on age), replacement cost (replacing your home and contents at the current price for the goods) or guaranteed replacement cost (adds a percentage above your home’s replacement cost to cover inflation)
  • The deductible amount you’re comfortable with

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

4. Buy your home insurance

Once you round up your quotes and make a decision on which homeowners insurance is best for you, buy your home insurance. If you opt to prepay your policy for a year or schedule automatic payments, you’ll receive an additional discount (typically 5%) of your policy cost.

Frequently asked questions about how to buy homeowners insurance

How can I save on homeowners insurance?

There are several ways to save on homeowners insurance. Start by comparing quotes from several insurers to find the best price. Look for savings, such as home security system, multi-policy and autopay discounts. Consider raising your deductible — you’ll have to pay more in the event of a claim, but your monthly premiums will be lower. Additionally, look at how your payouts are structured. A cash value policy costs the least, while guaranteed replacement cost is the most expensive.

What’s the difference between cash value, replacement cost and guaranteed replacement cost?

If part (or all) of your home or property is damaged or lost, there are three ways your insurance company will pay to rebuild or replace your property:

  • Cash value is the least expensive to buy and the smallest payout — you’ll be reimbursed for the actual value of your property, with depreciation deducted. This means you’ll need to find older versions that match what you lost or pay the difference in purchasing new goods out of pocket.
  • Replacement value will pay you to replace your property with new versions of what you lost.
  • Guaranteed replacement value accounts for inflation and adds a percentage to your replacement cost. It’s the most expensive type of policy. If your policy covers $300,000 today, it would automatically adjust up to 20% ($360,000) down the road.

Pick the one based on your budget and needs.

Do I need homeowners insurance?

Homeowners insurance is mandatory if you’ve financed your home and you’re paying a mortgage. Your bank or mortgage lender will require you to have home insurance. If your home is paid in full, you don’t have to have home insurance. It’s advisable to insure your home even if it’s not mandatory — the cost of a homeowners policy is much lower than paying for damage, theft or loss out of pocket.