Buying a first home is exciting, but it also requires a lot of work.
If you’re getting a mortgage, you’ll likely be required to get a homeowners insurance policy. While homeowners insurance functions differently from other types of insurance you may have gotten before, the process of getting a policy is quite similar.
Before you start your search for a homeowners insurance policy, plan to spend an hour or two shopping around to find the best coverage. Once you’ve carved out some time, here’s what you need to know to get the right policy.
How much is homeowners insurance? It depends on where you live and your home’s value
Homeowners insurance costs an average of $1,211 per year, according to data from the National Association of Insurance Commissioners. But the costs vary across the country — homeowners insurance tends to be cheaper in more rural states where home prices are lower. In 2020, homeowners in Ohio, Missouri, and South Dakota paid the lowest premiums.
Homeowners insurance costs increase with a home’s value, too. While the average $200,000 home costs $1,092 per year to insure, the average $500,000 home cost about $2,000 per year to insure, as Clint Proctor reports for Business Insider.
To start shopping, you’ll need lots of information about your home on hand
Chances are that you’re shopping for insurance before you’ve even moved into your new home. Yet, to get an accurate quote, you’ll have to have a lot of information about the house handy.
Oftentimes, insurers ask about things you won’t know off the top of your head. You’ll need information like the age of the roof, the type of heating system in the home, and details about the electrical system. Luckily, your home inspection report and the home’s listing should be able to help.
By this point, you’ve probably already had a home inspection for the house you’re planning to buy. Home inspections are very detailed, and most of that information should be noted on an inspection report. Pulling up your home’s listing can also help fill in the gaps. Have these documents on hand as you shop for insurance and buy the policy.
Make sure that you have enough coverage, and know what your homeowners insurance policy covers
A home is likely the most expensive thing you’ll ever own, and having the right amount of insurance to cover it is a must.
As you shop around for insurance, you’ll want to note a policy’s coverage limit for rebuilding. According to the Insurance Information Institute, some simple math can help you estimate your rebuilding coverage limit. Multiply your home’s square footage by the cost build a home in your area per square foot, and your rebuilding coverage limit should be at least that amount.
Homeowners insurance covers your home and the things in it. Homeowners insurance also generally includes other buildings on your home’s property, like a garage. However, homeowners insurance policies often don’t cover flooding or earthquakes, according to the III. If either situation is common in your area, adding extra coverage to your homeowners insurance policy might be a smart move. There are other exceptions, too, and reading your policy’s documents can help you better understand what is excluded.
You can save money by shopping around, and bundling any other policies you may have
Each insurance company will quote you a different price for your homeowners insurance policy.
Your quoted price depends on the way each company weighs information about your home’s size, type, condition, location, and your information. While one company might be the best price for a friend’s house, it might not offer the best price for yours. Just like you would if you were getting a car insurance policy, you’ll want to get quotes and compare them to find out which company offers you the most coverage for your money.
It’s also worth noting that bundling your other insurance policies, like a car insurance policy, can help you save. When shopping, get quotes for all of your policy types, and see which company offers the lowest price for them all combined.
Shopping for homeowners insurance shouldn’t take too long, and doing so will help you be sure you’re getting the best deal possible.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
