Shopping for a homeowners policy can be an intimidating and confusing experience because of the variables that factor into the price quotes. For example, Californians can expect to pay more if they live in an area prone to wildfires, while Floridians may face additional expenses if they live near the coast. Further complicating matters, the property’s value also weighs heavily on the potential coverage price.
Thankfully, with the plethora of insurance products on the market, Homeowners should be able to find a comprehensive and affordable policy if they do the proper research.
Table of Contents
How Are Homeowners Insurance Quotes Determined?
A home insurance quote estimates deductibles, limits, discounts, coverage types, and premiums that a homeowner can expect to pay for insurance on their property. Insurers produce these estimates based on:
- The property’s size
- Flooring
- The existence of an attached dwelling
- Personal property
- The estimated price of the property
- Location
- The risk of damage to the property
As with many types of insurance, properties at risk of having a claim filed on them are more expensive to insure. However, home insurance is highly variable because of the price of homes and the range of variables that determine their value. Considering all those factors also makes for an involved process in getting a quote.
When searching for a quote, insurance agents interview the applicant for information on the previously mentioned factors. The agent enters their items into their system as the homeowner answers questions. The system then estimates how much the items would cost to replace if a covered loss destroyed them. From there, the system provides a range of estimates that vary by coverage.
The homeowner selects their liability coverage limit and the associated deductible. These numbers help inform the ultimate premium the homeowner pays monthly.
What does Homeowners insurance cover?
Homeowners insurance covers the homeowner’s dwelling and other property items. Property for home insurance includes:
- The home structure or dwelling.
- Any attached structures like a garage or breezeway.
- Any detached structures like a shed.
The property also includes personal property or the homeowner’s items within their dwelling. Personal property covers clothing, furniture, appliances, and other items that aren’t permanently attached to the dwelling.
A quote can also include coverage for scheduled items. A scheduled item is an item of value that the homeowner lists separately on their policy to hold additional coverage. Scheduled items can be fur items, coin or stamp collections, art items, firearms, priceless silver, jewelry, or any other valuable item.
What Factors Influence Homeowners Insurance Quotes?
Factors that influence a homeowner’s quote include the size of the home, the attached and detached structures, the home’s location, and the finishes in the house. Personal property items, like scheduled items, furniture, clothing, and appliances, are evaluated during the quote process and can also impact the quote.
Some insurance companies also consider the past claims filed on the home when generating a quote. If the property has a history of theft or water damage, it may indicate that its location is risky and, therefore, will be more expensive to cover.
Some insurance companies also consider the applicant’s credit score when quoting for a policy. Statistically, those with low credit scores are more likely to file a claim and, therefore, more expensive to insure.
How do I Determine How Much Home Insurance I Need?
When considering the level of coverage, one should consider how much coverage they would need should a covered peril destroys their home. This limit should not just cover the value of the property, replacement of personal items should weigh heavily into this decision as well.
To correctly calculate this amount, homeowners should have their house appraised and create an estimate of the value of their personal belongings and the building materials used in their property. Generally, the homeowner should call the insurance company and update their coverage limits as the price increases.
Staying current on the total value of your property is essential because if its value increases due to any additions or renovations without the policyholder increasing coverage, they become financially responsible for the remaining price.
Home Insurance Coverage Types
The insurance companies also offer a replacement or cash value coverage for the homeowner’s property. The insurance company would replace the lost or destroyed items with actual cash value but only at their depreciated value. For replacement cost, the insurance company would pay the homeowner to go out and buy all new items to replace the lost or damaged ones.
Some companies offer an endorsement called the guaranteed rebuild cost endorsement. This endorsement indicates that an insurance company will fully rebuild a home destroyed by a covered loss, no matter how much the prices have changed for building materials.
Dwelling Coverage
The dwelling coverage is how much the insurance company would pay to rebuild the damaged portion of the dwelling. Typically, this is the maximum amount the insurance company would pay to rebuild a destroyed home due to a covered loss. An insurance company would rebuild a home no matter the cost with the guaranteed rebuild cost endorsement. This is however subject to certain conditions. For example, the home must be insured at least 80% to value.
Other Structures Coverage
Some examples of “other structures” include a detached shed, a gazebo, an inground pool, or even fences. Insurance companies insure other structures against the same perils as they do the dwelling. Companies typically allocate 10% of coverage to replace other structures. For example, if the insurance company covers the dwelling for $250,000, the maximum coverage for other structures is $25,000.
Personal Property Coverage
The Insurance Information Institute also states that personal property items are valued at 50% or 70% of the home structure coverage amount. Personal property is furniture, clothes, small appliances, sports equipment, and anything not permanently attached to the dwelling. Insurance companies generally cover personal property under the same perils as the dwelling.
Liability Coverage
Liability coverage protects the homeowner and the residents against lawsuits for property damage or bodily injury caused to guests or anyone who incurs damages you are responsible for. The liability coverage amount serves as compensation for the injured party and a defense cost for the homeowner. Coverage limits start at $100,000 and go up to $1,000,000+.
Additional Living Expenses
Additional living expenses cover the added cost of living elsewhere while the home is unlivable and under repair. A homeowners policy categorizes these items as loss of use on the policy. Loss of use covers restaurant expenses, hotel bills, and other expenses the homeowner must pay while away from home.
How Much Does Homeowners Insurance Cost
Homeowners insurance prices depend on the homeowner, their possessions, the insurance company, and the home’s location. A company may deny coverage or offer higher rates to a homeowner with a low credit score or who has made many claims within the claim window. A large, higher-end home will cost more to insure than a modest size with standard fixtures.
The way insurance companies determine risk varies from company to company. Also, some companies prefer to insure in certain areas while others consider the same place too high of a risk. They’ll either raise the rates to accommodate the risk or deny coverage to that area altogether.
What Is the Cheapest Homeowners Insurance
Generally, the cheapest homeowners policy has the lowest coverage and highest deductible covering the dwelling, liability limits, and additional living expenses. But the buyer should beware that the cheapest policy isn’t typically the best option. When policy limits are too low, and the deductible is too high, the homeowner is left to pay a large portion of the repairs out of pocket. They’re also available for litigation if a person suffered an injury on their property.
What Information Do I Need to Get Homeowners Insurance Quotes?
During the quoting phase, a homeowner should be prepared to provide their name, birthdate, and property address. The agent may be able to look up other information, like the year the home was built and the square footage. If not, you should be prepared to provide that as well.
The agent will ask whether the homeowner has done any updates or repairs to the home, like a recent roof replacement or kitchen update. They’ll also ask about the appliance replacement dates and current condition. Some companies require the agents to conduct short inspections where they take photos of various rooms in the home for company records.
How Do I Get Free Homeowners Insurance Quotes?
Many major insurers offer free quotes to homeowners looking to switch companies. They’ll even sweeten the offer by adding a bundling discount for moving your auto policy.
These days, most insurance companies have quoting resources online. The homeowner can access the company’s website and put in all of their information to pull a quote themselves. However, potential customers can often still reach an agent over the phone for those who prefer to talk to a real person.
How to Compare Home Insurance Quotes
Homeowners should consider their financial resources and coverage needs when shopping and comparing home insurance policies. Knowing what you’re looking for will make the process of elimination easier once you have all of your quotes. The homeowner should also ensure they get the broadest range of quotes possible to get the full spectrum of prices. Often the more options one has, the higher the potential to get a good deal.
Get Quotes from Multiple Companies
The homeowner should speak with at least two insurance companies for home insurance quotes. The more companies they talk to, the better idea they’ll have for reasonable prices in the area. They’ll also have an easier time picking the best company for them and their property once they have all the available options.
Compare Policy Coverages
The homeowner should quote their home with as many similarities as possible. Pay special attention to the coverage limits, liability limits, and deductibles. Notate personal property coverage, medical payments and other additional living expenses, hazard coverage, and endorsements.
Compare the Type of Replacement
Make sure the deductible is the same for all of the quotes and the coverage types. The quote should indicate whether the insurance company offers actual cash or replacement value on their policies. You should notate any company that provides a guaranteed rebuild endorsement as well.
Compare Personal Information
The policyholder’s name, birth date, animal breeds, and other personal information will impact the coverage price. You should double-check that information with the agent to ensure everything is correct.
Compare Premiums
How insurance companies evaluate risk varies from company to company and from person to person. While insurance shopping is about more than just the premium, the company that requires the lowest premium for similar coverage is typically the winner.
Weigh Deductibles and Limits
The policy limits are the maximum amounts the company will pay towards fixing your house and replacing your property due to a covered loss. Make sure to have high enough limits to replace your belongings and rebuild your home without paying more than the deductible out of pocket. The best dollar amount for the deductible is a dollar amount that you either have on hand at all times or could get to easily and quickly.
Compare Companies
Check each company’s customer satisfaction rates and their rating with the Better Business Bureau. Homeowners should also note each company’s financial stability and add all available discounts they can.
How Can I Lower My Home Insurance Quotes?
A homeowner can consider bundling their auto policy with their homeowner’s policy if the initial quote is too high. They can also take a few months to rebuild their credit score if that is one of the factors contributing to a high quote. You should double-check for all applicable discounts and try to qualify for as many as possible. You should also ensure all of your home upgrades are accounted for to see if they’ll yield a lower rate for your policy.