How to Buy Homeowners Insurance in 5 Steps
When shopping for homeowners insurance, the first step is deciding how much coverage you need. Then, you should gather information about your home before comparing quotes from multiple companies. Once you have a few quotes, you can compare companies and buy a policy.
It's best to find a company that offers a balance of affordable rates, useful coverage and great customer service.
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Step 1: Figure out how much coverage you need
First, you'll need to determine the types of coverage and policy limits you need to buy to protect your property.
The coverage you need will vary based on where you live, how your home was built and a handful of other factors. For example, if your home has a pool, you should consider higher liability and medical payments coverage limits.
What home insurance do I need?
Home insurance includes coverage to protect you in five different ways.
Dwelling coverage
Dwelling coverage protects the actual structure of your home. This includes attached structures (such as garages) and built-in appliances (such as water heaters).
How much do I need?
Your dwelling coverage limit should cover the cost to rebuild your home if it's totally destroyed in a disaster. This number is different from its resale cost, which includes the value of the land.
Most insurance companies offer two different levels of dwelling coverage.
Personal property coverage
Personal property coverage protects your belongings, like clothing and furniture.
How much do I need?
Your personal property limit should be high enough to replace all of the things in your home. To figure out how much your stuff is worth, you should create a written inventory of all of your belongings, including:
- Clothing
- Electronics (computers, televisions and speakers)
- Kitchen appliances
- Furniture
- Rugs
- Window treatments
- Jewelry
- Art
- China and silverware
- Sports equipment
Like dwelling coverage, personal property coverage can also be based on actual cash value or replacement cost value. If having brand-new things is important to you, it may be worth the extra money to have replacement cost coverage.
Actual cash value will only pay you based on the amount your stuff is currently worth. So if your 10-year-old couch is destroyed, you probably won't get enough money from insurance to buy a brand-new one.
Liability coverage
Liability coverage protects you against potential lawsuits if someone is hurt on your property. It also helps pay your legal expenses if you accidentally hurt someone or damage their property.
How much do I need?
Basic home insurance policies typically include $100,000 of personal liability insurance. But you should buy as much liability coverage as you can reasonably afford so you have enough to protect you from an expensive accident.
Extra liability coverage doesn't usually cost much. For example, increasing your limit from $100,000 to $300,000 only costs about $15 more per year.
Additional living expenses
Additional living expenses (ALE) coverage pays for the costs of temporary housing if your home is damaged and it's unsafe to live there. This can include the cost of a hotel or rental home, moving costs and food costs if you don't have access to a kitchen. ALE coverage can also be called loss of use coverage.
How much do I need?
Your additional living expenses limit is typically a percentage of your dwelling limit. Most insurance companies set the maximum coverage at 30% of your dwelling coverage amount. For example, if your dwelling coverage limit is $250,000, then your ALE limit could be up to $75,000.
If you own a condo, your ALE coverage may be up to 50% of your dwelling limit.
Medical payments
Medical payments coverage pays the medical bills of anyone who's injured in your home, regardless of whose fault it is.
How much do I need?
Insurance companies typically offer between $1,000 and $5,000 of medical payments coverage. When choosing your medical payments coverage limit, consider things like the safety of your home and how often you have guests.
For example, if you live alone in a small single-story home and don't entertain often, you may not need much medical payments coverage. But someone who owns a multilevel home with a pool and regularly has guests or workers in their home should consider getting more coverage.
Each of these coverages provides protection against certain types of damage, like theft, fire and wind damage. Insurance companies call these "perils."
Extra homeowners insurance coverage options
Many homeowners insurance companies offer ways to upgrade your coverage for an extra fee.
For example, basic home insurance only covers expensive items such as jewelry and artwork for a limited amount. If you have an expensive wedding ring, you can buy extra coverage so it's fully protected.
Other common add-ons include identity theft coverage and protection against flooding from a backed-up sewer or sump pump.
Certain hazards, like earthquakes and floods, aren't covered by standard policies. Other events, like tornadoes, may be excluded if they're common in your area.
For example, if you live in a region of California prone to wildfires, your insurance company may limit fire coverage.
Homeowners who live in an area where certain natural disasters or weather events are common should consider buying separate flood insurance or earthquake insurance.
Who needs homeowners insurance?
Most people with a mortgage on their home need to buy home insurance.
Mortgage lenders require homeowners to have a minimum amount of coverage to protect their investment in the home.
You should apply for a home insurance policy at least one week before your closing date.
The lender may want to pay your homeowners insurance bill on your behalf and include the cost in your monthly mortgage payments. This allows your lender to make sure you don't have a lapse in your insurance coverage.
If this is required by your mortgage lender, then you'll open an escrow account when you sign for your mortgage.
Even if you're not required to have a policy, you should still consider getting coverage.
Without homeowners insurance, you'll have to pay for any damage to your home. That could get very expensive if you have major damage after a fire or windstorm. You can't predict when you'll need to file a claim, but when you do, you'll be happy you're covered.
Step 2: Gather the information needed for a home insurance quote
To get a quote, you'll need to provide personal info and details about your home.
Personal info
Home info
Personal info
- Full name
- Birth date
- Social Security number
- Address
- Date you want the policy to start
Personal info
Personal info
- Full name
- Birth date
- Social Security number
- Address
- Date you want the policy to start
Home info
Home info
- Year your home was built
- Year your roof was installed
- Total square footage
- Foundation type
- Exterior and interior features and finishes, like roof and flooring material
- Type and age of your heating and cooling system
- Date and type of any renovations
- Age of your hot water heater
- Miles to the nearest fire station
- Estimated value of your belongings
- Whether you own a particular breed of dog
Step 3: Shop for homeowners insurance quotes
Once you have an idea of how much insurance you need, compare quotes from multiple companies to find the best rates and coverage.
There are four main ways to shop for home insurance:
- Compare quotes using an online tool
- Visit an insurance company's website
- Speak with an agent at the insurance company
- Work with an independent insurance agent
The fastest way to get home insurance quotes from multiple companies is to use an online quote tool. A quote tool will ask you to enter some basic info about you and your home. Then, you'll be able to compare quotes from a few companies.
Find Cheap Homeowners Insurance Quotes in Your Area
If you're interested in buying insurance from a specific company, you can usually get a quote on the company's website. Most homeowners insurance companies make it easy to get quotes online.
The downside to this approach is that you'll have to enter the same information on each company's website to compare quotes from different companies. And some midsized or smaller companies don't have an online quote tool.
Another option is to call an insurance company and speak to an agent. This can be helpful if you have questions about the company's coverage options or want to customize your policy.
But it usually takes more time than getting a quote online, and you'll have to call each company individually.
Working with an independent insurance agent can be a great choice for some homeowners. Independent agents work with lots of different insurance companies, so they can get you multiple quotes quickly.
These agents typically work with smaller insurance companies that don't offer quotes online, and they may be able to get you a great deal from a company you haven't heard of.
But most national insurance companies, like State Farm and Geico, don't partner with independent agents. So you should also shop for insurance from larger companies on your own to make sure you're getting the best rate.
Additionally, you may want to ask friends, family and neighbors about their insurance company and how happy they are with the coverage and customer service they receive.
Step 4: Choose a home insurance company
Once you've gathered quotes from a few different companies, you'll need to choose the best home insurance policy for you.
The best home insurance company combines affordable rates, reliable customer service and enough coverage to protect you and your home.
Compare home insurance companies
Company | Annual rate | ||
|---|---|---|---|
| Erie | $1,244 | |
| State Farm | $1,363 | |
| USAA* | $1,518 | |
| Farm Bureau | $1,580 | |
| Auto-Owners | $2,155 | |
*USAA insurance is only available to military members, veterans and their families.
Find Cheap Homeowners Insurance Quotes in Your Area
It's important to choose a home insurance company with great customer service because it will make your life a lot easier if you have an emergency.
A company with dependable service will help get your home fixed quickly. On the other hand, a company with poor customer service could take longer to pay your claim, and you could have to pay more money for repairs.
Step 5: Buy a home insurance policy
The first thing you'll need to do when buying a home insurance policy is choose a start date. If you're buying a new home, make sure that the start date is the same as the day you close on the home.
Once you sign your policy documents, a copy of the policy will automatically be sent to your mortgage company. At that point, your mortgage lender will pay the bill for your new policy using the escrow account.
If you canceled your old home insurance policy in the middle of the term, you may get a check back for any unused premium.
Make sure to send this to your mortgage lender so it can deposit it into your escrow account. Otherwise, you may end up with a big deficit in your account at the end of the year, which you'll have to pay back.
Frequently asked questions
What is the first step when buying homeowners insurance?
The first step to buying a home insurance policy is deciding how much coverage you need. Even if you already have homeowners insurance, it's important to take a look at your coverage limits and make sure they're high enough to properly protect you and your home.
Do you need homeowners insurance?
Most people need to buy home insurance because it's typically required by your mortgage lender. If you don't have a mortgage, you should still consider getting a policy. Home insurance is the only way to protect your home against damage, so if you don't have coverage, you could end up with a big bill if you have an emergency.
What are factors you consider before selecting home insurance?
You should consider price, customer service reviews and coverage options when choosing a home insurance company. Finding a cheap policy is important. But if your home is destroyed by a fire, you'll want a company with great service to help get your life back to normal quickly.
Methodology
To compare quotes for home insurance, we collected rates from top companies in every residential ZIP code across the country. Dwelling coverage is based on the median home age and value for each individual state. Quotes also include $100,000 of personal liability coverage, $5,000 of medical payments coverage and a $1,000 deductible.
ValuePenguin's analysis used insurance rate data from Quadrant Information Services. These rates were publicly sourced from insurer filings and should be used for comparative purposes only — your own quotes may be different.
Editorial Note: The content of this article is based on the author's opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.