How to Buy Home Insurance (2024)

When purchasing home insurance, consider how much coverage you need, what you can afford, and if there are any specific risks in your area.

Jessica Martel
Written byJessica Martel
Jessica Martel
Jessica Martel

Jessica is a freelance writer, professional researcher, and mother of two rambunctious little boys. She specializes in personal finance, women and money, and financial literacy. Jessica is fascinated by the psychology of money and what drives people to make important financial decisions. She holds a Masters of Science degree in Cognitive Research Psychology.

Chris Schafer
Edited byChris Schafer
Chris Schafer
Chris SchaferSenior Editor
  • 15+ years in content creation

  • 7+ years in business and financial services content

Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.

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Updated November 7, 2023

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Homeowners insurance covers losses and damage to your property during unexpected events like a fire, storm, or burglary. The purpose of home insurance is to ensure you can afford to return your house to its original state if a disaster occurs. While there’s no law stating that you must have homeowners insurance, most mortgage lenders will require proof of coverage before they extend you a loan.

Purchasing home insurance is a big decision and can feel overwhelming if you’ve never done it before. This article offers step-by-step guidance on how to buy home insurance.

Quick Facts
  • Standard homeowners policies generally don’t cover floods and earthquakes.

  • 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.

How to buy home insurance

If you’re looking for a new home insurance policy, there are several things to consider when trying to get the best deal on coverage.

1. Decide how much coverage you need

When trying to determine how much coverage you need, consider how much money it would take to rebuild your home and replace your belongings in the event of a fire or explosion.

Additionally, consider how much you would need for additional living expenses if you had to live somewhere else temporarily while your home was undergoing repairs. Finally, if someone is hurt on your property, how much coverage do you need to protect yourself from a lawsuit?

Most standard homeowner insurance policies provide four types of coverage:[1]

  • The structure of your home

  • Personal belongs

  • Liability protection

  • Additional living expenses (also known as loss of use coverage)

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 TypeAmount CoveredWhat’s Covered
Dwelling coverageVaries between companiesStructure of your home
Other structures coverageVaries between companiesGarages, tool shed, gazebo
Personal property coverage50% to 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 coverageTypically starts at $100,000; recommended minimum of $300,000 to $500,0003

Lawsuits for bodily injury, property damage caused by policyholders or family members to other people

Damaged caused by pets

Medical payments coverageTypically $1,000 to $5,000Bodily injury suffered by guests in your home, regardless of whether you’re liable
Loss of use coverageVaries between companiesHotel bills, meals, and other living expenses

A few other types of homeowners insurance coverage that might be worth considering include:

  • illustration card https://a.storyblok.com/f/162273/100x100/4ec24627d2/flood-coverage.svg

    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 from some private insurers.

  • illustration card https://a.storyblok.com/f/162273/100x100/c922a01b77/house.svg

    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. Decide on a deductible amount

A homeowners insurance deductible is the amount of money you have to pay out of your own pocket before the insurance company takes over. Your deductible can vary based on the insurance company you choose and the type of policy.

The deductible you pay is subtracted from what your insurance company will pay toward your claim. In general, the larger your deductible, the lower your insurance premiums. 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 you the remaining $9,500.

With a percent deductible, say you have a $200,000 home insurance policy and a 2% deductible. This means $4,000 will be deducted from any claim payment. If you submit a $50,000 claim, you’ll receive $46,000 from the insurance company.

3. Gather details about your residence

When applying for home insurance, the insurer will likely ask you some of the following questions in order 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

The average annual cost of home insurance is based 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 hydrant, your claims history, and even your credit.

The cost of home insurance can vary greatly between companies, which is why it’s a good idea to compare homeowners insurance quotes from multiple companies. Taking this step can help you save hundreds of dollars per year.

Once you’ve narrowed your choice down to a few companies, you can compare quotes. You can also look at how the price of your premium will change if you increase your deductible.

Before choosing an insurance company, take some time to review the financial strength of the insurer as well as its customer service and satisfaction ratings.

5. Take out a 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

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Where to buy home insurance

Before purchasing home insurance, it’s a good idea to compare multiple companies to see which one is the best fit for you. When it comes to how to find insurance, you can go about it in a few different ways.

From an agent

If shopping for home insurance stresses you out, or you don’t feel comfortable searching for insurance online, a local insurance agent can help you find a policy. While some agents, known as captive agents, work exclusively for one insurance company, other agents, called independent agents, can help you get quotes from multiple places.

Another option is to work with a broker. While both agents and brokers can help you find an insurance policy, an agent represents an insurance company, and a broker represents you, the client. A broker can help you shop for a policy across multiple companies.

A benefit of working with a knowledgeable agent or broker is it can save you time and money. However, if you work with a captive agent, you limit your options and may miss out on finding the best policy for you.

Since agents and brokers are salespeople and often work on commission, they may also be incentivized to sell you a more expensive policy than you need.

Directly from an insurance company

Buying direct means you go to a specific insurance company without an agent and ask for information and a quote. In many cases, you can do this over the phone or online. Even if you go this route, it’s still a good idea to collect quotes from multiple insurers to ensure you’re getting a good deal.

While buying insurance directly from an insurer can be an easy and fast way to get coverage, you risk missing out on a better deal from a different company.

Comparison websites

Another option is to use an insurance-comparison website. Comparison websites aren’t insurance companies. Instead, they help simplify the process of looking for insurance by comparing multiple companies at once.

When you use comparison sites, you can easily compare quotes and find the best price. However, a comparison website doesn’t necessarily help you choose the product that’s right for you. You still have to compare product details to see which suit your needs.

Average Cost of Home Insurance (June 2024)

Average Cost of Home Insurance (June 2024)

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.

  • How long does it take to get homeowners insurance?

    It’s possible to get homeowners insurance in as little as a few minutes, but it can take up to a few days or weeks depending on whether you purchase your policy online or through an insurance agency. Other factors, such as the age and relative risk of your home, can also affect how long acquiring home insurance takes.

  • How much homeowners insurance do you need?

    How much homeowners insurance you need depends 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, most mortgage companies 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 to ensure it’s protected.

  • 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 prevent a gap in insurance, make sure your new policy is in place before canceling your previous policy.

Sources

  1. Insurance Information Institute. "What is covered by standard homeowners insurance?."
  2. Insurance Information Institute. "Homeowners Insurance Basics."
Jessica Martel
Jessica Martel

Jessica is a freelance writer, professional researcher, and mother of two rambunctious little boys. She specializes in personal finance, women and money, and financial literacy. Jessica is fascinated by the psychology of money and what drives people to make important financial decisions. She holds a Masters of Science degree in Cognitive Research Psychology.

Chris Schafer
Edited byChris SchaferSenior Editor
Chris Schafer
Chris SchaferSenior Editor
  • 15+ years in content creation

  • 7+ years in business and financial services content

Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.

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