How to Shop for Homeowners Insurance (2024 Guide)

Shopping for the best homeowners insurance isn't as cut and dry as it initially seems, but it doesn't have to be difficult. If you're prepared and know the right questions to ask, shopping for homeowners insurance can be a breeze. With this guide, you can shop for the best home insurance coverage and premiums with confidence. 

Key Takeaways

• There is much more to consider when shopping for homeowners insurance companies than just price.
• Knowing coverage options, endorsements, and exclusions can help you make informed homeowners insurance policy choices. 
• An insurance company’s reputation is as important as its rates. 
• Understanding the difference in replacement cost and actual cash value is vital. 
• You can avoid costly mistakes when shopping for homeowners insurance companies with a few easy tips.

Step-by-Step Guide to Shopping for Homeowners Insurance

Homeowners insurance may feel very simple: Here's my home address and mortgage amount — how much does it cost to insure my home? However, there is much more to consider when looking to insure one of your most valuable assets. Below is a six-step guide to shopping for homeowners insurance. 

Step 1: Assess Your Home Insurance Needs

Your homeowners insurance rating criteria and coverage needs are unique to you. Preparing the following information for your home insurance quotes in advance will make the process quicker and result in more comprehensive coverage.

• Your home's characteristics: This includes location, age, square footage, and features. 
• Assets at risk: Liability coverage exists to protect your assets in the event of legal liability. The liability coverage you need depends on the value of your assets. 
• Personal property inventory: Have an idea of the worth of your personal property as a whole, as well as high-value items that may need additional coverage, like artwork, jewelry, and collectibles. 
• Special circumstances: Operating a business from your home, regularly hosting special events, and other particular circumstances can affect additional endorsements or coverages you may need. 

Step 2: Understand the Different Types of Coverage

Homeowners insurance policies include a variety of coverages. Here are some common coverages included in a standard policy, though coverage limits will vary based on policyholder needs.

• Dwelling Coverage: Coverage for your main home structure. Extended dwelling coverage refers to detached garages, fences, or other outbuildings. 
• Personal Property Coverage: Covers the items in your home (and away from home under certain circumstances) for property damage. Limitations apply to certain high-value items, and some personal property may be excluded.
• Medical Payments: Pays for medical expenses for injuries that occur on the policyholder's property, up to the policy limits.
• Liability Coverage: Protects you against legal liability and property or injury damages to others as a result of activity on your home premises. 
• Additional Living Expense Coverage: This coverage provides help with expenses related to the loss of use of your home when it becomes uninhabitable due to a covered loss. 

Optional extra coverages or add-ons may be offered as an endorsement to your homeowners policy or as a stand-alone policy. For example, earthquake insurance is often available as an endorsement with a separate deductible. On the other hand, flood insurance and personal liability umbrella policies are often stand-alone policies designed to provide more extensive coverage than what's offered on homeowners policies.

You can purchase flood insurance through private flood insurance providers, but it is most often underwritten by the National Flood Insurance Program (NFIP) and provides protection for rising water claims.

Personal Liability Umbrella policies provide more comprehensive liability protection above and beyond existing insurance policies for claims related to automobiles, homes, and other property. They are usually purchased by the same insurance carrier as your homeowners policy. 

Step 3: Get Multiple Quotes from Different Insurers

The best way to ensure you get the most comprehensive homeowners insurance coverage for the lowest premium is by getting quotes from at least three to five insurance companies. Online comparison tools make quoting easy. 

Another option is to consult with an independent insurance agent who has access to multiple insurers. Rates can vary widely from insurer to insurer and change often. 

Step 4: Compare Policy Coverage

Getting the best price is a priority when shopping for homeowners insurance, but what coverage you get for that money is also important. Comparing coverage limits on standard homeowners insurance coverages isn't enough. 

Look for the fine print and ask about policy exclusions and endorsements. Asking about what isn't covered is as important as asking about what is. 

For example, you might think personal watercraft, four-wheelers, and other high-value items stored in your garage are covered as part of your personal property coverage. In reality, that's not always the case! Additionally, coverage may be limited for items brought home from work and other unique situations. 

Exclusions and limitations can make all the difference in a major loss. Understanding the available endorsements for non-standard coverages such as floods, earthquakes, and high-value personal property can prevent misunderstanding and non-covered losses. 

Step 5: Compare Policy Costs

Choosing a higher deductible is one way to save money on your homeowners insurance. The higher the deductible, the lower your premium. 

The risk in choosing a higher deductible comes at the time of claim. If the claim's value is lower than your deductible, you will have to pay the entirety of the claim. 

Even with high-cost claims, you'll still have to pay a substantial amount out of pocket when you have a high deductible policy. If you're seeking a homeowners insurance claim, you're probably going through a difficult time, and paying all the money could be challenging. 

Think about risk versus reward when choosing your policy deductible. 

Step 6: Evaluate the Insurance Company’s Reputation

A home insurance company's reputation is crucial when purchasing coverage, which is essentially a promise — a promise to be there when the unexpected in life occurs. How they do that should matter to you when shopping for homeowners insurance. 

The financial strength of an insurance company indicates its ability to pay claims in the future. You can evaluate the financial strength of homeowners insurance companies like Allstate, State Farm, and other local and national insurers by checking ratings from A.M. Best, Moody's, or Standard & Poor's. These credit rating agencies evaluate insurers so that you can rest assured that your policy is backed by more than a piece of paper. 

In addition to claims, you want an insurance company that provides top-tier service. Customer reviews can tell you a lot about an insurance company's reputation, but you should read them cautiously. It's not nearly as common for people who have had years of happy customer service to leave reviews as it is for those who have had bad experiences. 

J.D. Power or the Better Business Bureau (BBB) are good places to check reviews on customer satisfaction with claims handling and service. 

Key Factors When Evaluating Homeowners Insurance Companies

Questions to Ask When Shopping for Homeowners Insurance

Asking a few extra questions can help you get the best possible homeowners insurance rate. It may also help you better understand whether an insurance company is truly looking out for your best interests. 

Question: What types of discounts are available, and do I qualify?
What to Look for in the Answer: Insurers should be able to quickly identify multiple discount opportunities and qualifiers to help with home insurance costs. Some examples include bundling with your auto insurance, new home, new roof, alarm systems, first-time home buyer, credit score, claims history, and impact-resistant roof discounts.

Question: How are claims handled, and how long does the process usually take?
What to Look for in the Answer: A response about the claims process should be straightforward but also indicate that processing times vary according to the severity of the claim and whether it is part of a larger catastrophe affecting many people. 

Question: Will my premium increase after I file a claim?
What to Look for in the Answer: Beware of an insurer that says they never increase premiums as a result of insurance claims. Home insurance premiums will not change mid-policy term but have the potential to increase at renewal. 

Question: Should I consider any additional coverages based on my home's location?What to Look for in the Answer: Recommendations may include additional windstorm, earthquake, flood, wildfire, or sinkhole coverage for areas prone to these natural disasters. For example, if you live in California, you may be advised to get wildfire coverage.

Question: How much coverage do I need for my personal belongings?
What to Look for in the Answer: The amount of coverage you need for your personal belongings depends on what you own. Personal property coverage usually begins at 50% to 70% of your dwelling insurance but can be increased based on your needs.

Mistakes to Avoid When Shopping for Homeowners Insurance

Your home insurance protects one of your most valuable assets. Rushing through the process to find the best price without understanding the totality of your homeowners insurance coverage can lead to frustration and financial hardship later. Here are a few common mistakes to avoid when shopping for homeowners insurance:

• Assuming that if the premium is good, the policy is comprehensive. 
• Not asking about exclusions and endorsements
• Choosing dwelling coverage based on your mortgage balance or an arbitrary number other than replacement cost. 
• Not asking about replacement cost versus actual cash value for all coverages and perils
• Getting homeowners insurance quotes only instead of looking at your insurance portfolio as a whole
• Failing to ask about discount opportunities
• Not doing your research on the financial strength and customer satisfaction of home insurance companies

FAQ: How to Get Homeowners Insurance

How much homeowners insurance do I need?

When determining how much insurance coverage you need, two important things to consider are the replacement cost of your home or personal property and your mortgage lender's required coverage. 

Your mortgage lender will require an amount of coverage equal to at least your mortgage loan. However, that amount may not be adequate to repair or rebuild your home or replace contents in the event of a claim. Meet your lender requirement minimums, but exceed that amount if needed to provide adequate replacement cost protection. 

What’s the difference between replacement cost and actual cash value?

Replacement cost and actual cash value refer to how an insurer pays out a claim. Replacement cost value coverage will pay you the total and current amount required to repair or replace damaged property, minus your deductible, up to any coverage limits. Extended replacement cost may provide an additional 10% to 50% over your dwelling coverage limit if needed. 

Actual cash value deducts depreciation based on age and wear and tear from the cost to repair or replace damage. This is a very important distinction when deciding on a home insurance policy. 

How do I know if I need flood or earthquake insurance?

Flood and earthquake protection is typically outside of what traditional homeowners insurance covers and are optional add-ons, but some lenders may require it. 

You can research your earthquake zone to determine if you live in a high-risk area or obtain a flood zone determination to see if you are within a 100-year floodplain. Earthquakes and floods can happen anywhere, including low-risk areas. Only you can decide which risks you are willing to absorb or insure. 

What factors should I consider when choosing my deductible?

There are a few things to consider when choosing your deductible. Are you willing to pay less on your home insurance rates annually but have to cover more costs later if you have a claim? Would you prefer the security of paying a little more annually in exchange for lower out-of-pocket costs when you need to use coverage? Ultimately, the decision is up to you and what risks you're willing to take. 

Your lender may have a maximum deductible restriction as part of your policy. 

Article written by Shawnette Good. 

Shawnette is an insurance professional with 30 years of industry experience helping consumers understand complex insurance topics. Outside of writing, Shawnette enjoys long nature walks and volunteering in her community.