(You know, so you can focus on the important stuff, like curtains)
Maggie Tiede |February 14, 2019
It’s no secret that buying a home is a lot of hard work. But finding the right homeowners insurance to protect those four walls can be even worse. Luckily, we went ahead and did the research for you and whittled the entire process down into seven-and-a-half simple steps.
And once you’ve got a good idea of what you’re looking for, our independent insurance agents are here to help you take it to the next level. They’ll shop multiple carriers, bring you quotes from some of the top insurance companies, and walk you through it all in good ol’ plain English.
What Is Homeowners Insurance?
Simply put, homeowners insurance is a contract between you and an insurance company. You pay them monthly, quarterly, or yearly (these payments are called “premiums”) and in exchange, if your home is damaged, they’ll cover your costs (what they agree to protect is called “coverage”).
Most insurance companies will ask you to pay a certain amount of damage before their coverage kicks in. This amount is called a “deductible.” Generally speaking, lower deductibles are good and higher deductibles are bad, but a lower deductible does mean you’ll pay more in premiums.
Pretty simple, right? We’ll dive deeper into the finer points later. But now, let’s talk how to shop, step by step.
Step 1: Have a Reason to Buy Homeowners Insurance
Saving money and/or upgrading your coverage is one common reason to buy new homeowners insurance. Obviously, buying a new home is another. If you’re buying a new home, you need to have homeowners insurance before closing on your home. And there are a few good reasons why.
First of all, your home is one of the most, if not THE most, valuable assets you own. Unfortunately, fires, hurricanes, and thieves already know that. They’re chasing after your home like it was the last cookie in the jar.
The other reason—and this is also important—is that the bank won’t let you get a mortgage without insurance. They know where their bread is buttered. (Hint: It’s in your wallet.) If your home is destroyed, their collateral is destroyed, too. They’ll require homeowners insurance to protect themselves.
Step 2: Fill Out an Application
Homeowners insurance is all based on a giant math problem. Companies make an educated guess about how likely your home is to get damaged in a given year, based on its value, age, roof type, number of corners (really!), and a bunch of other things.
To do this math, companies need your info. Fill out an application online or in person (if you’re old-school like that) so they can figure out what insurance to offer you. Not sure what to put down? An insurance agent can help, and they can even fill out the application for you.
Step 3: Research the Insurance Companies
After you’ve completed the application, you’ll likely have a few different insurance companies (called “carriers” in the biz) to choose from. Qualities to compare between carriers include:
Home insurance discounts: Discounts lower your premiums. Carriers offer all sorts of discounts, from common ones like military and veteran discounts to more niche ones like clergy and farmer discounts. Don’t be shy about asking what discounts a company offers and which discounts have already been applied to your quote.
Company size: Would you prefer a mom ‘n’ pop shop on Main Street or a sleek high-tech corporation? There’s no right answer, just your preference, but be sure to factor it into your decision.
After-hours support: Check out a carrier’s website to feel out their hours and claims support options. Most home insurance companies offer 24/7 claims reporting, but their hours for regular customer support with your bill or policy may be much more restrictive.
Step 4: Compare the Coverage
Fire and theft may be common reasons for claims, but they’re not the only claims you can make. Homeowners insurance can cover all sorts of surprising things related to your home, including medical bills and legal costs related to incidents that happen on your property.
Unfortunately, there’s also lots that it doesn’t cover, and it’s important to make sure your lifestyle and coverage line up. That trampoline in your backyard could actually invalidate your coverage under certain policies—so be sure to read the fine print carefully.
Unlike car insurance, with homeowners insurance you can’t pick and choose your amount of coverage. It covers a fixed amount related to the replacement value of your home, and that’s it. That said, if you have valuable items in your home, like fine jewelry or guns, homeowners insurance can cover it if you ask.
Step 5: Weigh Out the Prices
Before you make it official, double-check that you’re paying a fair amount for homeowners insurance. Things that can push costs higher include living in an area without good fire coverage, having poor security, or owning a home that would be expensive to replace.
It may seem surprising, but the cost of homeowners insurance isn’t related to how much you paid for a home, only its replacement value. It’s also unrelated to the value of the land—only to the buildings and property built or stored on the land.
Premium costs can vary widely from a few hundred to a few thousand dollars a year (and higher, if you own a mega-mansion). Ways to reduce costs include asking for discounts, bundling your car and home insurance, and picking an insurance plan with a higher deductible.
Step 6: Seal the Deal
Once you’ve picked a quote, finalizing your insurance is as simple as a signature. Congrats! You did it. Whether you simply changed insurance companies or bought insurance for the first time, we’re giving you an air high five as we speak.
Step 7: Cancel Your Old Policy
Starry-eyed over your brand-new, super-awesome policy? Enjoy the honeymoon, but don’t forget to break it off with your old beau, too. Luckily, your new insurance agent can deal with it for you. You’ll usually be required to put the cancellation in writing for legal reasons. But once that’s done, you’re free.
Step 7.5: Don’t Screw Up While Selling Your Old Home, Either
You should never, ever remove insurance on a home until you have proof you sold it. That means closing time. You could be liable for damage if there’s an issue with the new owner’s insurance.
Here’s how to avoid this nightmare scenario:
Fill out paperwork carefully. No cutting corners, no under-the-table deals: You need this paperwork to protect yourself, no matter how trustworthy you think the buyer is. Follow the guidance of your bank, real estate agent, and insurance agent.
Only cancel the insurance once you have proof of sale. Keep paying premiums until that point, even if your home is paid off and you’re not living in it. Bills are awful, but giant, life-ruining bills and legal fees are way worse.
The Awesome Benefits of an Independent Insurance Agent
Independent insurance agents are the super-duper not-so-secret life hack to buying homeowners insurance. They work for you, not the insurance companies, so they can find you the right prices with the right company for you. They’ll also help you through all the boring parts of the application process.
But their sidekickin’ doesn’t stop there, either: If disaster strikes and you need to make a claim, they’ll help you meet deadlines and file paperwork so you can maximize the benefits you’re entitled to.