Background working with banks and insurance companies
Sarah enjoys helping people find smarter ways to spend their money. She covers auto financing, banking, credit cards, credit health, insurance, and personal loans.
5+ years in insurance and personal finance content
Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.
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Homeowners insurance protects you from the financial risk of loss or damage to your home in the event of a covered peril, like a natural disaster, fire, or other hazards. Many mortgage companies and loan servicers require home insurance, so if you’re financing your house, you’ll likely need coverage.
Whether you’re buying a new home or want to change your existing homeowners policy, shop around to find the best homeowners insurance for your needs and budget. Here’s a closer look at how much coverage you need, what affects your rate, and how you can save.
Quick Facts
You can buy home insurance online, using a price-comparison website, through an insurance agent, or directly from an insurer.
When determining how much coverage you need, consider the cost of the structure of your home, the value of your belongings, and the amount of liability protection and living expenses coverage you’ll require.
Standard homeowners policies generally don’t cover floods and earthquakes.
How to shop for homeowners insurance
Shopping around for homeowners insurance can help you find the cheapest rates. Here’s a closer look at what to consider when trying to get the best deal on coverage.
1. Decide how much coverage you need
Most standard homeowner insurance policies provide four types of coverage:[1]
When it comes to the structure of your home, a standard homeowners insurance policy will cover disasters such as fire, hail, lightning, and explosions. Most standard policies won’t cover flooding or earthquakes. If you live in an area where your risk of these events occurring is high, consider getting additional insurance.
Make sure you have enough insurance to cover the costs of completely rebuilding your home. Some policies may limit your coverage amount to the cost of your mortgage.
To determine how much you need to cover your personal belongings, you can take an inventory of your personal possessions. You’ll then need to consider the following policy types:
Actual cash value: What your possessions are currently worth (taking depreciation into account)
Replacement cost: The cost to purchase new replacement possessions
In this table, you’ll find a deeper explanation of the coverage types you can have on your homeowners policy.[2]
Coverage Type
▲▼
Amount Covered
▲▼
What’s Covered
▲▼
Dwelling coverage
Varies between companies
Structure of your home
Other structures coverage
Varies between companies
Garages, tool shed, gazebo
Personal property coverage
50%–70% of the amount of insurance on the structure of your home; generally covers up to $500 per item
Furniture, clothing, sports equipment, and other personal items
Trees, plants, and shrubs are also covered
Personal liability coverage
Typically starts at $100,000; recommended minimum of $300,000–$500,000
Lawsuits for bodily injury, property damage caused by policyholders or family members to other people
Damaged caused by pets
Medical payments coverage
Typically $1,000–$5,000
Bodily injury suffered by guests in your home, regardless of whether you’re liable
Loss of use coverage
Varies between companies
Hotel bills, meals, and other living expenses
A few other types of homeowners insurance coverage that might be worth considering include:
Flood insurance
While flood insurance coverage isn’t included under standard homeowners policies, it’s available as a separate policy from the National Flood Insurance Program (NFIP) and some private insurers.[3]
Guaranteed replacement cost coverage
This policy will pay the costs to rebuild your home to the state it was before the disaster, even if it’s over the policy limit. This coverage is available through a limited number of insurers.
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2. Choose a deductible amount
A homeowners insurance deductible is the amount of money you have to pay out of pocket before your insurance company takes over. Deductibles vary by insurer and the plan you choose. Generally, the larger your deductible, the lower your insurance rate.[4]
A deductible can be calculated as a flat-dollar amount or a percentage of the total amount of your policy. For example, if you have a flat-rate deductible of $500 and a claim worth $10,000, your insurer will pay $9,500 after you pay $500.
Percentage deductibles work a bit differently. For example: Say you have a $200,000 home insurance policy and a 2% deductible. You’d pay a deductible of $4,000 (or 2% of $200,000) before your insurance kicks in. So, if you’ve submitted a $50,000 claim, your insurance would cover $46,000 after you pay the 2% deductible.
3. Gather details about your residence
When applying for home insurance, the insurer will likely ask you some of the following questions to prepare a quote:
What year was your house built?
Who lives in your house?
Do you have pets?
Do you run a business out of your house?
What is the square footage of your home?
What is the type and age of your roof?
What is the style of your home?
Do you have a security system or any other safety devices?
Have there been any previous claims on the house?
To determine the amount of coverage you need, you can calculate factors such as how much it would cost to rebuild your home. Variables that can affect the cost of rebuilding include:
Materials used to construct the walls of your home (brick vs. veneer)
Style of your home (ranch, colonial, etc.)
Number of rooms
Type of roof and materials used
Any other structures on the property (garage, shed)
Any special features (fireplaces, arched windows, swimming pool)
If you’ve made improvements or done renovations (added a bathroom, renovated kitchen)
How to create a home inventory
A home inventory is basically a list of your personal belongings, and it can help you assess the value of what you own. To create an inventory:
Make a record of your items on a piece of paper or use an inventory app.
Describe each item, including where you bought it, make and model, and how much it cost.
Keep receipts as proof of value.
Take photos or videos to accompany item descriptions.
Consider if you need extra coverage for expensive items, like jewelry or art.
Don’t forget to update your inventory as you purchase new items.
4. Compare quotes from home insurance companies
Insurers base the cost of home insurance on factors such as where you live, natural disasters in your area, coverage amount, the condition of your roof, how close you live to a fire station, your claims history, and even your credit history in most states.
But the cost of home insurance varies widely between companies. Comparing home insurance quotes is the best way to get the coverage you need and can help you save hundreds of dollars per year. When comparing quotes from different insurers, ask for the same coverages and limits.
Homeowners have a few options to get home insurance quotes:
Use an online comparison platform. An online comparison tool, like Insurify, can help you compare quotes from many different insurers at once. Some platforms also help you sign up for a new policy after you choose an insurer.
Talk to an insurance agent. Consider using an agent if you want to speak to a person about the best coverage for your needs. Many agents represent more than one insurer, so they can help you compare quotes from different companies.
Reach out directly to insurers. Compare quotes from different insurers by getting estimates from a handful of insurers. You can generally speak to an agent, call the company, or visit an insurer’s website for a quote.
5. Buy your home insurance policy
Once you’ve chosen the insurance policy that’s right for you, it’s time to close the deal. Make sure you read and understand the details of your policy.
Your policy document will contain coverage details for your dwelling, other structures, personal property, and liability insurance. It will also include information such as your:
Policy number: The number you use if you need to file a claim
Policy period: The start and end date of your policy, which is typically one year
Coverage limits: How much coverage you have for each type (dwelling, other structures, personal property, and liability)
Deductible: The amount you have to pay out of pocket before your insurance company steps in
Endorsement(s): Also known as an insurance rider, any policy add-ons that change or provide extra coverage
Average cost of homeowners insurance by state
The national average cost of home insurance for $300,000 in dwelling coverage with a $1,000 deductible is $2,377, based on Insutify data. But home insurance quotes can vary widely based on what state you live in.
Below are the average home insurance rates for a policy with a $300,000 dwelling limit in each state.
State
▲▼
Average Annual Premium
▲▼
Alaska
$1,116
Alabama
$3,939
Arkansas
$3,368
Arizona
$1,961
California
$1,782
Colorado
$4,072
Connecticut
$1,764
Delaware
$1,207
Florida
$10,996
Georgia
$2,426
Hawaii
$1,150
Iowa
$2,120
Idaho
$1,636
Illinois
$2,050
Indiana
$1,866
Kansas
$3,437
Kentucky
$2,476
Louisiana
$6,354
Massachusetts
$1,863
Maryland
$1,670
Maine
$1,322
Michigan
$1,840
Minnesota
$2,332
Missouri
$2,706
Mississippi
$4,312
Montana
$1,778
North Carolina
$2,110
North Dakota
$2,519
Nebraska
$3,962
New Hampshire
$1,225
New Jersey
$1,267
New Mexico
$3,362
Nevada
$1,224
New York
$2,257
Ohio
$1,342
Oklahoma
$5,444
Oregon
$1,232
Pennsylvania
$1,306
Rhode Island
$2,036
South Carolina
$3,082
South Dakota
$2,562
Tennessee
$2,470
Texas
$4,456
Utah
$1,369
Virginia
$1,600
Vermont
$918
Washington
$1,437
Washington, D.C.
$1,203
Wisconsin
$1,462
West Virginia
$1,392
Wyoming
$2,159
Factors that affect homeowners insurance rates
Insurance companies take numerous risk factors into account when quoting your homeowners insurance premium. Here are some of the most common elements of your profile insurers consider:
Home improvements and changes
An addition, a new roof, or refinishing a basement often affects your rate. Check with your insurer after making any home improvements or alterations.
Attractive nuisances
Swimming pools, trampolines, and other potentially risky backyard toys often cause premiums to go up due to possible accidents.
Age and materials of your home
Older homes are often more expensive to insure due to the cost of replacing hard-to-find materials or outdated systems. The age of your roof can also affect your rates.
Heating source
Homes heated with a wood-burning stove may have higher premiums. But you may be able to decrease your premium with proof of proper installation.
Time at home
Some insurance companies offer lower rates if you’re home all day. So if you work from home, be sure to let your agent know.
Home security
Safety measures, like installing deadbolts or an alarm system, could help you save on your premium. Ask your insurer what type of discounts you may qualify for.
Pets
Dog owners may face challenges finding affordable homeowners policies if the insurer considers their dog breed dangerous or aggressive, like pit bulls and rottweilers.
Claims history
The more claims you file, the higher your premium is likely to be. In some cases, if you file too many claims, your insurer may terminate your policy or refuse your renewal request.
Many home insurers offer discounts for paying your annual premium in full or bundling other types of insurance, like auto, with your homeowners. Discounts may also be available for installing security measures, like cameras and alarm systems.
Improve your credit
A good credit history can help you qualify for cheaper insurance rates. Keep an eye on your credit and monitor your credit reports regularly for errors or suspicious activity.
Comparison shop
Compare quotes from multiple home insurance companies to find the cheapest rates. When rate-shopping, be sure to get quotes that meet your lender’s insurance requirements.
Make fortification home improvements
Some states offer incentives for having a fortified home, like insurance discounts and tax credits. Consider making fortification home improvements to strengthen your home against severe weather events like hurricanes, tornados, high winds, and hail.
Adjust your deductible
Raising your deductible can help you save on your home insurance premium. Keep in mind that if you have to file a claim, you’ll need to pay the deductible in full before insurance kicks in. Your agent can help you find a deductible that best fits your budget.
Avoid coverage gaps
A lapse in homeowners insurance can be costly. To avoid force-placed insurance from your loan servicer, be sure not to let your policy lapse.
How to buy home insurance FAQs
Purchasing home insurance can feel a bit overwhelming. But knowing your home and personal items are properly protected if a disaster were to occur can bring you peace of mind. Here’s some additional information to help guide you through the process of purchasing home insurance.
What’s the 80% rule in homeowners insurance?
The 80/20 rule is an insurance industry standard that stipulates you should insure your home for at least 80% of its replacement cost. If you insure your home for less than this amount, your insurance company might not cover your entire claim. If you make renovations that increase your home’s value, be sure to adjust your coverage.
What company has the cheapest homeowners insurance?
Westfield has the cheapest homeowners insurance in the U.S., with an average annual premium of $1,080 for a policy with $300,000 in dwelling coverage and a $1,000 deductible.
Other affordable insurers include Grange and Hastings Mutual, with respective annual premiums of $1,220 and $1,364.
How much homeowners insurance do you need?
It depends. How much homeowners insurance you need varies on how much it would cost to rebuild your home, replace your belongings, and cover your living expenses.
You should also consider how much liability coverage you need for financial protection if someone were to hurt themselves on your property.
When should you buy a homeowners insurance policy?
While no law states that you must have home insurance, your mortgage lender will require proof of coverage before they extend you a loan. That’s why it’s a good idea to have homeowners insurance in place before closing on the property.
How do you switch home insurance companies?
To prevent an early cancellation fee, it’s often best to switch your insurance when your policy is up for renewal. It’s a good idea to compare quotes from multiple companies before deciding to switch. To avoid a lapse in insurance, make sure your new policy is in place before canceling your previous policy.
Sarah Archambault enjoys helping people figure out how to manage their finances and credit. She covers auto financing, banking, credit cards, credit health, insurance, and personal loans. Her work has been featured on Credit Karma, Experian, LendingClub, Sound Dollar and USA Today Blueprint. She also writes for national insurers, banks and financial institutions like Aetna, MassMutual, Stripe, and UnitedHealthcare.
Sarah has been a contributor at Insurify since December 2022.
5+ years in insurance and personal finance content
Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.
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