How to Buy Homeowners Insurance: What You Need to Know
Whether your offer just got accepted on your first home or you’re looking to update your current home’s policy to better fit your needs, understanding the ins and outs of how to buy homeowners insurance is crucial. After all, you want to make sure your home is properly protected, right? But you also don’t want to pay more than you have to for adequate coverage.
Walking this line can be tricky if you don’t know what you’re signing up for. But luckily, our insurance experts are here to help you every step of the way. From how to determine your home insurance coverage needs to the information you’ll need to sign up, our guide covers everything you need to know about shopping for homeowners insurance.
1. Determine your home insurance coverage needs
First, you’ll need to determine just how much coverage your home and belongings need. A traditional homeowners insurance policy will protect your dwelling, personal belongings and liability. But each category hosts its own policy limits and exclusions, meaning you may not be
protected for as much as you think when it comes time to file a claim.
It’s important to note that your homeowners insurance policy can be personalized to fit your needs. So if you have an older home that costs more to repair or if you have a lot of expensive electronics, you can update your policy to make sure everything is financially shielded.
Your homeowners insurance policy covers your dwelling, personal property and liability. However, it’s important to note that the policy limits and add-ons can be personalized to fit your needs.
The dwelling coverage portion of your policy financially protects your home’s structure, including additional structures on your property like fences, sheds and detached garages. In the event of a natural disaster (as long it’s not listed as an exclusion on your policy), you will be covered for repair and replacement costs to get your home back in working order. You may even get loss of use coverage should a fire or other emergency make your home unlivable.
Personal belonging coverage extends to all the items inside your home, such as electronics, furniture and jewelry. Unlike dwelling coverage, personal items are covered under a named peril policy, meaning you’ll only be covered for damages that occur from a listed event. These typically include things like fire, hail and theft. If you want to further protect your items, you will need to add on specific peril coverage or expand your policy limits.
The last portion of your homeowners insurance policy is personal liability. Liability coverage offers financial and legal protection should someone get injured on your property and sue you for medical fees or lost wages. Liability also protects property damage inflicted by others or any damages you accidentally make to someone else’s home.
However, there are a few things that homeowners insurance policies don’t cover. Specific perils like earthquakes, floods and sewer backups need their own policies, while other issues like intentional injuries won’t be covered at all. Make sure to talk to your insurance agent about the potential gaps in your policy, especially if you are in a high-risk area, to make sure you are fully covered.
2. Consider policy add-on options
If you are looking for more financial protection in the event you need to file a claim, there are various additional coverage options available to help you get to where you want to be. Say that upon inspection, you may come to learn that your sewer system is older and therefore more susceptible to issues over time. You’d want to consider add-ons like water backup or service line coverage to help pay for repairs should your current system fail.
Other add-ons for your policies that have to do with specific perils are generally excluded from your traditional policy. Things like flood, earthquake, windstorm and sinkhole coverage are not often included, though one or all may be a required add-on depending on your home’s location. You might also want to consider coverage for equipment breakdowns or replacement cost contents to make sure you can afford to replace your items at their original value.
3. Know what affects your policy rate
There are lots of factors that go into determining your homeowners insurance policy rate. As mentioned above, the age of the home and its current condition are two of the main factors. However, your financial history, credit score, the home’s location and even the crime rate of the area are taken into consideration as well. Each insurance company will look at these factors differently, so make sure to shop around to find the best rate for your needs.
Another factor that affects the price of your home insurance policy is the level of Coverage A protection you’re asking for. The three options you will most likely be faced with are actual cash value, replacement cost and extended replacement cost.
Actual cash value (or ACV) means that your insurer will reimburse you for the cost of replacing your belongings with depreciation factored in. Replacement cost takes away the depreciation deduction and offers full coverage up to the amount you paid for the item.
Guaranteed replacement cost takes that protection a step further, covering up to 20% or more of the actual cost to repair or replace something. Though rates do increase with more coverage, you may find it helpful if you want to update things as you rebuild or if prices for materials increase.
Ultimately the level of coverage you have (and your accompanying rates) are mostly up to your discretion. While it’s a good idea to not purchase more coverage than you can afford, you also want to make sure that you aren’t on the hook for extensive repairs should the worst happen.
4. Get the information you need for buying home insurance beforehand
Similar to putting an offer on a home, the timeline for getting home insurance can be pretty tight. Especially if you’re purchasing a home for the first time, your mortgage lender will need proof of coverage before approving your loan. To help speed up the process, it’s best to collect all the information you’ll need before you begin shopping.
You’ll need personal information such as your SSN and DOB, as well as information on the home like the address, copy of the inspection report and the appraisal.
Some of the standard information they will be requesting (that you probably already have on hand) is your personal information. This includes:
- Social security number
- This isn’t required by Hippo, but can be for other insurers
- Current and past employer information
- Previous addresses
- Number of kids
- Number of pets and their breeds
- Any high-risk items on your property such as a trampoline or a pool
They will also need a lot of information on your home, including:
- Your home's address
- Copy of the inspection report
- Copy of the appraisal
- Age of the home, roof, AC system and the pipes
- We backfill this info for you from trusted public data sources. Just another way we make your life easier!
- Any requirements made by your lender pending approval
If you aren’t planning to make this home your primary residence (or if you plan to operate a business out of it) you need to let your insurance agent know. Vacant home and landlord insurance policies are priced differently than traditional homeowners insurance, so there may be additional information you need to provide if this situation applies to you.
5. Know what to look for in an insurance provider
Picking the right insurance provider is key to lowering your annual premiums, as well as easing any headaches during the claim process. No matter if you choose to do research on your own or go through an insurance broker, it’s a good idea to get a few different quotes to see how major companies compare.
In addition to the overall price, it’s also important to take a look at customer service ratings, coverage options, add-ons (and their cost), potential discounts and their customer retention rate. These factors will not only give you an idea of how happy their current customers are with their service, but will also safeguard you from signing an overpriced or inadequate policy.
Thanks to secure platforms and easy access to customer support teams, many insurers (like us) operate mostly online and offer the same level of customer service you’d expect anywhere else.
Historically, insurance used to be purchased mainly at agency offices. However, the convenience of online shopping has made this a popular purchasing option for lots of homeowners in recent years. And with secure platforms and easy access to customer support teams, many insurers (like us) operate online with a team of agents available on the phone and offer the same level of customer service you’d expect anywhere else. Additionally, many companies will offer discounts for purchasing directly through their website.
Before purchasing a policy, it’s also important to assess the financial strength of the insurance providers you are considering. This is often a complicated process, which is why there are many companies out there that assess the health of insurance companies for you, and provide an unbiased rating on most brands in the industry. These companies include A.M. Best, Fitch, Kroll Bond Rating Agency, Moody’s and Standard and Poor’s.
6. Save on your homeowners insurance policy
As cost is typically top of mind for homeowners, you won’t be alone in asking for discounts or other additional benefits when signing up for a policy. In fact, many homeowners insurance companies offer a variety of discounts based on what you add to your home or how many policies you have with them to help boost their customer retention rates.
Some companies (hint: Hippo) will offer discounts if you install smart home devices or other security systems throughout your home. This is offered for two reasons. Not only do these items boost the value of your home, but they also help to keep you safer by alerting you to potential issues in your home before they get bigger. Others offer discounts on home maintenance services for their customers, which can help save you money should something break in your home.
Though a timely process, securing adequate home insurance coverage is so important for protecting your financial assets. And as you begin to make updates to your home and improve its value, make sure you’re sending through the cost of those updates to your insurance provider. That way, in the case of an accident, you can get fully reimbursed for the true value of your home.
Have any lingering questions regarding your upcoming home insurance purchase? Reach out to one of our agents or check out our homeowners insurance buyers guide to get all the answers you need.