What You Need to Know About Home Insurance Quotes
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If you’re in the process of buying your dream home, there’s more to think of than just square footage and mortgage price. When buying a home, a mortgage lender will typically require you to have homeowners insurance. This guide will break down the ins and outs of homeowners insurance costs and what you need to know before buying a policy.
In this article
What is home insurance?
Home insurance, also known as homeowners insurance, is a way to protect yourself financially in various situations. It can cover the actual structure of a house in case there is property damage or destruction from something like a fire.
Basic home insurance can include dwelling coverage, which protects the structure, as well as personal property coverage, which can cover any stolen items. So, if you have high-priced jewelry and electronics and they are stolen from your home, you may be able to recover the cost from the theft as it will be considered a covered loss.
Liability coverage can help protect you if something happens on your property.
So, if your or your pet causes damage to other people’s belongings or an injury, your policy can help cover those expenses, too.
In short, homeowners insurance covers the structure of your home, your belongings, and your liability.
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Home insurance quotes
When you apply for home insurance coverage, you’ll get homeowners insurance quotes, which are prospective prices you’ll pay for your policy. Each provider will have its own criteria for determining the quote.
Costs may vary by insurer, but providers typically look at similar factors that assess risk, liability, age, safety, and more. It’s important to note that home insurance quotes are merely estimates of what you might pay and could differ from the final cost.
Some home insurance providers require an inspection. A home inspection looks for risk levels, damage, wear and tear, and safety. If your provider requires a home inspection, your final home insurance policy quote may be higher.
Factors impacting your quote
Companies that offer homeowners insurance will base their home insurance quotes on a variety of factors, including:
- Neighborhood
- Size of home
- Age of home
- Proximity to fire stations/fire hydrants
- Living on the coast or body of water
- Flood risk
- Roof, whether new or old
- Pool or jacuzzi
Let’s take a closer look at some of these factors and how they affect home insurance rates.
Neighborhood/location
Where your home is matters. If your neighborhood experiences high crime rates, your home insurance quote will likely be higher. In addition to the neighborhood, the location matters as well. If you’re near the ocean or body of water, your risk is higher, which will also affect your home insurance costs.
If your home is close to a fire station or fire hydrant and you have home security, your home insurance quote actually might be lower. Being close to emergency care helps lower risk and liability.
Age and size of home
Home insurance protects the investment in your home should something happen to it. When it comes to risk factors, age and size of home are big ones. If you are interested in an older home that may require a lot of renovations in the future, your home insurance quote might be higher. The same is true for larger size houses as well. The more square footage, the higher the price. Consider that home insurance is designed to replace your home if necessary, so size and age determine the cost.
Safety
Additional security features like an alarm system for break-ins, deadbolt locks, sprinklers, smoke alarms, and a fire extinguisher can lower your risk for theft of personal property and damage. The additional security and safety from these features may result in a lower home insurance quote for home buyers, so keep an eye out for these features when looking for a new home.
Materials and building cost
Another factor determining your home insurance quote is the material your home is made of. For example, wood is more flammable, which means higher risk and would result in a higher quote. Having a brick home may mean a lower quote. On top of looking at the materials that your home was built with, the quote will be based on the cost of rebuilding your home. The home insurance provider may need the replacement cost, which refers to the amount required to rebuild your home as it was before or the cost of replacing your items.
Other factors
The factors listed above are fairly straightforward, and it makes sense that they would affect home insurance quotes. But there are some other lesser-known factors that you should consider as well.
For example, your credit score can affect your insurance premium in many states. Insurance providers want to lower their risk, so they may issue higher homeowners insurance rates for those with lower credit scores who might be more likely to file a claim. There are three states where checking your credit score for home insurance is banned, including:
- California
- Maryland
- Massachusetts
Aside from your credit score, your furry friend could impact your home insurance quote. For example, if you own a pit bull, your liability is higher, so your rate would likely be higher, too. If you own expensive musical instruments, your insurance premium could be higher as well.
Related: Hippo Homeowners Insurance Review
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Types of insurance
There are various homeowners insurance policies based on the home, which range from HO-1 to HO-8. According to the Insurance Information Institute, HO-3 is the most common type of homeowners insurance and provides broad coverage. Among these types of home insurance there are three different types of coverage options.
1. Actual cash value
Under an actual cash value policy, the total cost of your house and belongings will be covered minus any depreciation, meaning you'll get market value. In other words, the policy can replace the cost of what the home and belongings are worth now, not the price you paid.
2. Replacement cost
The replacement cost policy covers the cash value of your home and belongings. Still, it doesn’t deduct any depreciation and is especially helpful in loss of use after a fire or natural disaster. That way, you could replace or rebuild to keep the original value.
3. Guaranteed or extended replacement cost
This policy offers the most comprehensive homeowners insurance coverage and guarantees to cover the total cost of rebuilding or replacing items up to their original value, even if it is higher than the actual policy limit. An extended replacement cost coverage can cover more than the policy coverage limit, but only up to a certain percentage. Typically, the policy covers 20 to 25% more than the policy limit.
Though a guaranteed or extended replacement cost policy will be more costly, it provides the most coverage and is recommended.
What to consider when selecting an insurer
On top of these three coverage options, there are other things you want to consider.
Deductibles. For example, you’ll want to choose a deductible that works for you. A deductible refers to the amount you pay before anything else is covered. Your deductible could start at $500 or $1,000 and up. When you choose a higher deductible, you can score lower home insurance premiums.
Gaps in protection. You also want to consider the gaps in protection with your home insurance and look for any exclusions. Home insurance doesn’t cover everything and you may need additional coverage. It doesn’t include things like earthquakes or floods.
You can also look into flood insurance to cover water damage. You also want to consider your level of risk and personal liability.
Personal liability. Whether you have renters insurance or home insurance, getting personal liability insurance coverage can also cover your bases. Liability coverage may cover additional needs after the home insurance coverage is used up.
Bundling discounts. Home insurance companies will often provide discounts for multi-policy holders. For example, if you also buy car insurance through your insurance agent, your personalized policy discount will be greater than having one policy.
Choosing the right insurance provider
Choosing the right homeowners' insurance company ensures reliable coverage and excellent customer service. Here's a guide to help you select the best insurance company for your needs:
- Research company reputation. Look for insurance companies with a strong reputation for financial stability, customer service, and claims handling. You can check ratings and reviews from independent agencies like A.M. Best, J.D. Power, or the National Association of Insurance Commissioners (NAIC).
- Evaluate financial strength. Assess the financial strength of insurance companiesby reviewing their financial ratings from agencies like A.M. Best, Standard & Poor's, or Moody's. A financially stable company is more likely to be able to fulfill its obligations and pay claims.
- Check licensing and complaints. Verify that the insurance companies you're considering are licensed to sell homeowners insurance in your state. You can also check with your state's insurance department to see if the company has a history of complaints or regulatory actions.
- Compare coverage options. Evaluate the coverage options offered by different insurance companies, including policy features, coverage limits, deductibles, and exclusions. Choose a company that offers the coverage you need at a reasonable price.
- Consider customer service. Research the customer service reputation ofinsurance companies by reading reviews and talking to current policyholders. Look for companies with responsive customer service, easy claims filing processes, and knowledgeable representatives.
- Explore discounts and bundling options. Inquire about discounts insurance companies offer for features like home security systems, smoke detectors, orbundling multiple policies. Some insurers offer significant discounts for combining homeowners insurance with other types of coverage, such as auto insurance.
- Look for customization options. Choose an insurance company that can customize your policy to meet your needs and preferences. Look for options to adjust coverage limits, deductibles, and add-ons to tailor the policy to your situation.
- Review claims handling process. Investigate the claims handling process ofinsurance companies to ensure they have a reputation for fair and efficient claims resolution. Look for companies with a track record of promptly processing claims and providing satisfactory outcomes for policyholders.
- Seek recommendations. Ask friends, family members, or trusted advisors for recommendations on homeowners insurance companies with which they've had positive experiences. Personal referrals can provide valuable insights into the quality of service and coverage different insurers provide.
- Read policy terms carefully. Before making a decision, carefully review the terms and conditions of the insurance policy, including any exclusions, limitations, or endorsements. Make sure you understand what is covered and what is not covered under the policy.
Related: Homeowners Insurance Calculator
Home insurance companies
You want to check various home insurance companies to get your home insurance quote. Some major home insurance companies to consider include:
Allstate
Allstate stands out in the home insurance market with its comprehensive coverage options tailored to meet diverse homeowner needs. This includes essential protection for the home's structure, personal belongings, liability coverage, and medical protection for guests. They offer additional coverage options like water backup protection, personal umbrella policies, and access to flood insurance through the National Flood Insurance Program.
To encourage customers to consolidate their insurance needs, Allstate provides significant incentives, such as a 25% discount for bundling home and auto insurance policies.
Additionally, homeowners can benefit from a 5% discount by setting up automatic premium payments, making policy management both cost-effective and convenient. Moreover, Allstate rewards new customers with a discount if they have not recently filed a home insurance claim, showcasing their commitment to affordability and customer satisfaction.
State Farm
State Farm distinguishes itself with a robust selection of home insurance options and discounts that cater to a wide array of customer needs. Known for its flexibility in policy bundling, State Farm offers a notable discount for customers who combine their home and auto insurance, presenting an opportunity to save on premiums.
The company also recognizes the importance of home safety and security, offering the Home Alert Protection Discount for homes with qualifying safety and security features. This focus on safety encourages homeowners to invest in protective measures and translates into potential savings on their insurance policies. State Farm's approach to home insurance is designed to support homeowners in safeguarding their properties while also providing opportunities to reduce insurance costs through proactive measures and policy bundling.
Nationwide
Nationwide is another key player in the home insurance sector, offering a range of options that include bundling home and auto insurance for added savings. Nationwide is particularly appealing to recent homebuyers, offering discounts to individuals who have purchased a home within the last year.
Additionally, the company encourages homeowners to invest in their properties through the Home Renovation Credit, which is available to those who update essential systems such as heating, cooling, and plumbing. This incentive helps homeowners improve their property's safety and efficiency and provides financial benefits through reduced insurance premiums. Nationwide's policies and discounts are crafted to support homeowners at various stages, whether they are recent buyers or looking to upgrade their homes, emphasizing the company's commitment to comprehensive coverage and customer value.
FAQs
What factors affect the cost of homeowners insurance?
Several factors can affect the cost of homeowners insurance, including the value of your home, its location, the coverage limits you choose, the deductible amount, your claims history, the age and condition of your home, and any discounts you qualify for, such as multi-policy or home security system discounts.
Can I save money on homeowners insurance?
Yes, there are several ways to save money on homeowners insurance, such as bundling multiple policies with the same insurance company, installing safety features like smoke detectors or security systems, raising your deductible, maintaining a claims-free history, and shopping around for competitive quotes.
How do I file a homeowners insurance claim?
To file a homeowners insurance claim, contact your insurance company as soon as possible after the loss occurs. Provide detailed information about the damage or loss, including photos and documentation if available. Your insurance company will assign a claims adjuster to assess the damage and process your claim.
Competitive rates from multiple lenders
- No min credit score
- Personalized rates
- Find results fast
- No maximum loan in most states
The bottom line
Getting home insurance is part of the process when buying a home. You want to evaluate all the risk factors and research with home insurance providers to find the best policy for you. Even though it can be pricey, more protection may be the way to go. Home insurance that covers various situations can give you peace of mind. If you’re in the process of buying your dream home, there’s more to think of than just square footage and mortgage price. When buying a home, a mortgage lender will typically require you to have homeowners insurance.
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Writer
Melanie Lockert is the founder of the blog and author of the book, Dear Debt. Through her blog, she chronicled her journey out of $81,000 in student loan debt. Her work has appeared on Business Insider, VICE, Allure and more. Melanie writes about student loans, credit, and mental health and also is the host of The Mental Health and Wealth Show podcast.
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