Shopping for a home can be super fun and knowing that your family will have a foundation is a fantastic feeling, but figuring out the small things like how to buy homeowners insurance is excruciatingly painful.
Or is it:
What if I told you that it is much easier to get a home insurance quotes and buy home insurance now than it ever was before and that you don’t have to be part of the 70% of people that do no research when it comes to getting affordable home insurance.
In this post today I am going to go over not only how to shop for home insurance but also the best ways to go about purchasing it, what levels of coverage you should look for and who the best homeowners insurance company is in 2018.
How To Buy Homeowners Insurance
The process for buying homeowners insurance can be confusing and outright time consuming if you don’t know what you are doing.
To purchase homeowners insurance the right way you will need to know a few things:
Once you learn these 5 steps, there won’t be anything in your way to getting covered and having this part of the home purchasing process out of the way.
We will cover all of these areas below so that you can have a clear mind and be able to make the most informed purchasing decision.
What Is Homeowners Insurance
Let’s first address the most basic question, what is home insurance?
“In Plain English” - Homeowners insurance is protection against a covered loss of your house, the things inside of it, the things attached to it and the things around it.
Homeowners insurance policies have 5 parts of coverage to them:
This coverage is used to insure the structure of your home, as well as structures that are attached to your home like garages or appliances like your stove.
Other Structures Coverage
This coverage is used to insure “Other Structures” that are on your land like a tool shed, an outhouse or a dog house.
If your plan has this coverage, it’s limits will probably be determined based on the amount of dwelling coverage you have.
Personal Property Coverage
This coverage is used to insure your personal items like clothes, computers, furniture, and jewelry.
Your liability coverage is used to protect you against lawsuits if someone is injured in or on your property or if your dog bites someone.
Be sure to read your policy because some home insurance companies may not cover your specific dog breed for liability if they bite someone.
Additional living expenses Coverage (ALE)
I must say that ALE coverage is one of the most overlooked and underrated parts of homeowners insurance.
It is going to cover the costs of temporary housing why your house is being built or becomes uninhabitable due to a covered loss.
And guess what:
If you had a tenant in your home, it would cover their rent payments to you as well.
These 5 different parts of homeowners insurance covers you for a ton of perils like:
We also wrote a post about all the things your homeowner's insurance covers.
You won’t find coverage for earthquakes or floods, however, and we definitely recommend looking into that coverage separately.
Is homeowners insurance required
There aren’t any federal laws that mandate you have to have homeowners insurance.
However, just like you get insurance for everything else, your home purchase isn’t something you should let go without insurance.
Your home purchase will be one of the most significant investments you will make so not covering it with insurance would be a huge mistake.
Also keep in mind that just because it isn’t required by law, it doesn’t mean your mortgage lender or condo association won’t need it.
How Much Home Insurance Do I Need
To know how much home insurance you will need we must first determine a few things:
Once you have answered those questions, I recommend getting an additional half of the coverage amount just to be on the safe side.
If it will cost a total of $350,000 to replace your home, try to get $500,000 in coverage to combat anything that might change like costs in material or labor.
Each part of the policy is going to cover specific parts of your home so understanding the limits to each part of the policy will be extremely important.
You must also determine what type of replacement you will receive for each area of your policy:
Actual Cash Value
If you have a policy that focuses on just the actual cash value of the home or your personal property, you will be looking at the most affordable option.
However, this option will only give you what the current market value of the item you lost, is worth.
If your laptop is destroyed by a covered loss and you only have actual cash value coverage, you will only be reimbursed what that laptop is worth now, not what it would cost to actually replace the computer based on how much you originally paid for it.
Replacement Cost Value
Buying a policy that has the replacement cost value option will cost a bit more per month than a policy that only gives actual cash value.
However, this type of policy will give you the actual cost to rebuild your home today if you were to suffer a covered loss.
I would always recommend this option if you can afford it just because the price of labor and materials will ever be changing.
Just imagine your house is valued at $500,000 when you first built it, but it will cost $580,000 to rebuild it.
If you have replacement cost value attached to your policy, you would be good to go, and the policy would cover you.
If you only had actual cash value, someone would have to come up with that additional $80,000 to rebuild your home.
There are also some policies that offer Guaranteed replacement costs and Extended replacement cost value as well.
These two options will be the most expensive, but offer additional coverage limits a few percentages above your current policy limits.
You also need to determine what your risks may be for liability, your personal property and any other dangers you might be taking on as a new homeowner.
How Much Does Homeowner Insurance Cost
The cost of your home insurance is going to be determined by the levels of coverage that you purchase as well as the value of your home, and the state that you live in.
As we stated above, you need to decide what coverage amounts you want to go with in regards to your:
You will also find that the limits of your coverage for the below things are usually a set percentage of your dwelling coverage limit:
You will need to choose your home insurance deductible, which is what you will be responsible for before the insurance company starts to contribute.
Deductibles can range from $500 all the way up to $2,500, but keep in mind the lower your deductible, the higher your monthly premium and the higher your deductible, the lower your monthly cost will be.
You also want to be sure to get substantial limits on Liability Coverage as well as Medical coverage.
Your liability coverage will take care of any lawsuits that may come up while the medical part can take care of medical bills of people who have been hurt on your property.
* Rates are based on a nationwide average for annual premium.
Where To Find The Best Home Owners Insurance
As with anything, once you get educated on a product or service, the next question is where do you find it and where are the best places to purchase it.
When it comes to buying homeowners insurance there are only two places you should look at:
Buying online through a site like ours is going to be one of the best places to find homeowners insurance quotes and coverage.
When you shop online, you are able to get the fastest quotes and easy homeowners insurance comparisons.
You can purchase directly from companies like Hippo by clicking on our link to the right or checking out our review here.
When you shop online for coverage, you give yourself the ability to buy on your own time, and you can usually get quoted and covered in minutes not days.
You will also find that you can get a bit more savings when you are dealing with an all online insurance product since they have lower overhead they pass the savings on to you.
You also get the benefit of a faster processing of your claims; this is essential to any policy that you can purchase.
Through An Agent
Speaking with an agent is also a great option to find insurance information and get covered.
If you find yourself wanting to be hands off and have someone guide you through the process, then there is no better option for you.
We have to pull ourselves out of the idea that Homeowners Insurance is something that will come with our mortgage and just take what we are given.
As I stated above according to Hippo, during their recent study over 70% of people indicated they do no research or shopping around when it comes to homeowners insurance.
This is the worst number ever, and you should not be a part of that 70+ percent of people.
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