Your home insurance policy is protection for your home and your possessions. If your home needs repairs or even a rebuild after a covered incident like a fire, theft, or lightning strike, your homeowners insurance will step in and help pay those expenses. However, not all homeowners insurance policies are the same.
When you purchased your home, you probably looked at a lot of homes and compared the location, quality of the home, layout, and a number of other factors. You no doubt also compared prices. The same attention should be given to shopping for homeowners insurance – you want to make sure you’re paying a fair price and getting the coverage you need. Homeowners insurance policies will have different price points, but that’s not the only area to review. You’ll also need to check each policy quote to see what coverage is being offered.
Evaluate Policy Coverages
There are a few major categories of protection within each policy, and they might be handled differently. Compare what’s covered in each of these areas for the full picture:
- Dwelling coverage. This is your home itself and is probably the key element to any homeowners insurance policy. Most policies coverlightning, wind, hail, fire, theft, vandalism, and some other perils. It’s important that you review all of the perils listed and the details of your dwelling coverage.
- Personal property coverage. Most of your possessions inside your home will be covered by your homeowners insurance with the exclusion of high-ticket items like jewelry, fine art, and some expensive hobby or professional tools. These high-value items might require an additional policy. The key when comparing property coverage is to look at replacement value or actual cash value policies. Replacement value policies cost more but will pay to buy you a new and similar item if you suffer a loss.
- Personal liability coverage. If someone is injured on your property your homeowners may pay their medical bills. If you’re sued, your policy may also pay for legal expenses.
- Living expenses coverage. If your home is made unlivable through a situation that’s covered by your insurance, this coverage pays for some of your living expenses while your home is being repaired or rebuilt.
Identify Exclusions and Additions
When comparing homeowners insurance policies, check for exclusions and additions. The following are some of the common exclusions or events that are not covered:
- Flood
- Earthquakes
- Nuclear hazards
- War
- Government action
- Termites, mice/rats, and other pest infestations
- Mold
- Poor maintenance or neglect
- General wear and tear
- Power surges or outages
- Sump pump back-up
- Intentional damage done by you or another resident of the home
- Some dog breeds (this is part of the liability coverage)
In addition to the exclusions, you’ll find that there are some additions or add-ons you can make to your policy to give you more protection. Common additions to homeowners insurance include:
- Flood insurance (as a separate policy)
- Earthquake coverage
- Scheduled personal property insurance (covers valuable items beyond your regular possessions)
- Sewer back-up or sump pump protection
- Watercraft endorsement
- Home-based business policy
- Inflation guard
- Roof protection
Compare Costs
Once you have an idea of what the insurance policies you’re comparing cover, then you can look at the key determining factor – the price.
Premiums and Deductibles
When comparing any insurance policy, your main cost factors will fall into two buckets — premiums and deductibles. Your premium is the amount you’ll be paying monthly, quarterly, or yearly for your insurance.
Where it can get a bit confusing is the deductible. The deductible is the amount you pay off the top of repair or replacement costs before your insurance starts paying its portion. A higher deductible means you’ll be covering more of the expenses, which often means your premium will cost less. A low deductible or no deductible means it’s more likely that your insurance will have to pay for a claim, and they’ll be paying the majority of it, so your premium will cost more.
To compare the cost of homeowners insurance, look at the deductibles and the premiums and determine how much deductible you can afford to pay if there’s an issue and how much you will be paying annually in premiums.
Liability Limit
Having liability coverage in your homeowners insurance is a nice feature. This coverage protects you from lawsuits if someone is injured in your home. It can also provide coverage if you accidentally cause an injury or break something when you’re not at home. For people who own dogs, depending on the dog breed, your liability coverage can pay for dog bites and other injuries your pet causes.
The amount of liability coverage offered can affect the total price of your policy, so this is a good area to review.
Negotiate and Look for Discounts
While comparing homeowners insurance policies is a great approach to getting the best deal and all the coverage you need, it’s not the only way to save money. Insurance companies might be willing to negotiate a better price for you. Ask all potential insurers if they offer any of the following discounts.
- Bundling or multiple policy discounts
- New customer discounts
- Loyalty discounts
- First-time home buyer rates
- Senior discounts
- Discounts for teachers
- Discounts related to the age/condition of your home
- Gated community discounts
- Home upgrades that qualify for homeowners insurance discounts
- Discounts for military or service personnel
- Pre-payment discounts
There will be a cap on how many discounts you can use, but your insurance provider should help you find the best deal possible by considering all of these factors.
Assess Insurance Company
Finally, the most important step when shopping for homeowners insurance is looking at the reputation of the insurance company. Just like doing business anywhere, some companies provide incredible customer service and prompt responses, and others don’t stack up.
When you’ve suffered some sort of damage to your home, you’re going through a stressful period. Having an insurance company that has great customer service and a reputation for being fair and honest is going to be a huge benefit. They’ll help you get the ball rolling on your claim and move you quickly toward a solution. Bad customer service and an insurance company that fights your legitimate claims can make the experience more difficult.
Do some research with your local or state Better Business Bureau, look for reviews online, and ask your friends about their experiences. Of course, everyone is going to have a bad review or two, but you’ll begin to see a pattern and it will be fairly easy to pick out which insurance companies are more reliable and reputable.