Why It’s Important to Shop Around for Homeowners Insurance (And How to Do It)

It’s a moment that every homeowner hopes will never arrive, but for you, it’s here — you have to make a claim on your homeowners insurance. As you pore over your policy, you realize that the one thing you need isn’t covered. And that means tens of thousands of dollars out of your pocket. Of course, if you know how to compare homeowners insurance, then you can avoid this nightmare scenario.

Homeowner’s insurance is a specific type of coverage that safeguards the replacement value of your home against various types of damage. This can include fire, natural disasters, accidents, floods, or theft of personal property. If you finance the purchase of your home via a mortgage lender, they will usually require it — and even if you’re paying cash, having insurance on your house is extremely important.

An uninsured home isn’t just at risk for damage from nature’s elements, but it also puts you personally at risk if anyone gets hurt at your house, or if there are any other kinds of accidents or damage to other people’s property while it’s located at your residence.

It might seem that finding a good insurance carrier is a no-brainer, but not all policies are created equal, and not all will protect your home as much as you might think they will. Understanding the type and amount of coverage you need is part of it, but also, doing the legwork of comparing different types of policies, costs, and what kind of service your insurance broker offers can help prevent a lot of headaches later on!

We checked out some of the best ways to compare homeowner’s insurance, researching all the things you as a buyer should consider when you shop for insurance, as well as getting advice from real estate professionals about how to investigate what level of homeowner’s policy is right for you, while still getting the most value for your money.

Where to start comparing homeowners insurance

Illinois real estate agent Holly Connors, a 20-years-plus veteran of the industry, says that many buyers opt to bundle their homeowner’s policy with their current automotive insurance instead of shopping around — a choice that, while easy, isn’t always the wisest.

“Choosing your homeowner’s insurance is a big part of buying a house,” she says.

“It’s important for buyers to make sure they find not only the right insurance policy for their home, but the right insurance broker.”

Connors recommends that buyers start by doing a Google search for insurance brokers in their area, as well as requesting recommendations from friends.

A local broker will know the area and understand what kind of potential issues you might run into, such as whether there are hurricanes where you live, or if you’re in a flood zone. That’s why going local is often your best bet.

“Someone who knows you, knows the area, is going to be your best advocate,” Connors says. “That way, they can help you make the best possible choice for your home and your individual insurance needs.”

Once you’ve narrowed it down to a few different insurance companies, you can compare what kind of coverage they offer, prices, and the company’s track record when it comes to claims and customer service.

Keep in mind that not all national companies offer coverage in all regions, and that sometimes the smaller, local options can be a better fit.

Comparing coverage

The three most common types of homeowner’s insurance policies are HO-2, HO-3, and HO-5.

An HO-2 policy covers only specific issues, such as fire or smoke damage, theft, and vandalism. It does not cover anything else, nor does it include personal property.

An HO-3 policy provides more comprehensive coverage, which includes all potential problems except for those the insurance company lists as not being covered.

The most inclusive coverage is an HO-5. It not only includes everything the HO-3 does, but it also protects other structures on the property, such as a shed or detached garage.

When deciding on the type of coverage you need, you’ll want to consider all the things that might require supplemental or different coverage than a standard homeowner’s policy, such as whether the house has a pool, any additional structures on the property, or if you have a lot of valuable personal belongings.

Research common claims in your area, which any insurance brokers you interview should be able to provide for you, and ask your real estate agent about getting the claims history on the property you’re buying. This information can help you understand what kind of coverage is necessary for your region.

You might assume that your policy will automatically cover any kind of damage or disaster that befalls your home, but that’s not always the case.

“Buyers will want to talk to potential brokers about what their policies cover and what they don’t,” says Connors. “Things like flood insurance are usually add-ons, not part of regular coverage.”

Regular coverage also often excludes damage or theft for personal property, such as jewelry, as well as natural disasters such as earthquakes or hurricanes.

You’ll also want to investigate personal liability insurance, which protects you if someone gets hurt on your property, such as a dog bite or pool accident, or if a tree from your yard falls on your neighbor’s roof during a storm.

Basic coverage for liability is usually included in your policy, but if you have additional assets that you want to protect, or if you’re concerned the basic coverage might not be sufficient, then you may want to consider increasing that coverage or purchasing an umbrella policy, which increases the overall coverage limits for all of your insurance policies.

“These are the kind of questions people need to ask,” says Connors. “The right broker will have a conversation with you about the local rules and laws, your liability as a homeowner, and what is the best policy for you as a consumer.”

Comparing prices

The first thing you’ll want to find out is just how much the annual premium is for your homeowner’s insurance policy, as well as the deductible, which is the amount of money you’ll pay if something does happen to your home and you need to make a claim. “Sometimes a policy’s yearly premium will be low, but the deductible is higher,” says Connors. “You’ll need to look at how that impacts you as a homeowner.”

If a slightly higher premium means a lower overall deductible, a buyer might decide to go that route, especially if they are a first-time homebuyer or they don’t have a large amount of money set aside to pay deductibles if an emergency arises. A standard deductible is anywhere between $500 and $2,000.

Buyers will also want to weigh what is included with each policy and what costs extra, as well as whether they’ll receive discounts for things like bundling the policy with auto insurance, or for installing and maintaining specific safety features, such as carbon monoxide detectors or alarm systems.

Make sure the policy will fully cover the current replacement value of your home, and compare prices on any additional coverage you decide on. You’ll also want to ask about coverage limits, as most policies will only pay out up to a certain amount, and anything over those limits is your responsibility.

You can purchase policies that have higher coverage limits, but that will also mean higher premiums, so it’s important to weigh the difference in costs against what you feel comfortable potentially having to pay out-of-pocket if repairs go beyond what your policy covers.

Try to get quotes from at least three different brokers, and don’t be afraid to ask questions about what exactly is covered, what isn’t, and what makes their company better than another.

And remember — the least expensive policy isn’t always the best one. Making sure you get value for the price, and that the insurance broker you choose will be able to provide you with the coverage and service you need, is the most important part of choosing your homeowner’s insurance.

Comparing quality of service 

Before you make a final decision, take a look at reviews of the company. Sites such as Google or Yelp offer consumer reviews for different companies, and you can see how their customer service standards hold up and how satisfied customers are with them as an insurer.

Other websites, such as the National Association of Insurance Commissioners (NAIC), JD Power, or Am Best Consumer Center, can provide additional information about the company, such as how long they’ve been in business and how financially solvent they are.

Understanding the claims process for each company should also be part of your research. A company that has a reputation for slow payouts on claims, or one that has regulations on their claims that might seem excessive compared to other insurers, probably should be avoided.

Ask your insurance broker about how one goes about reporting a claim, and whether or not you’ll be filing a claim online, or if you’ll be able to talk to a live person 24/7 if the need arises. How long does it usually take each insurer to process claims, and how often do those claims get denied? How does each insurer represent you in case of an accident that results in litigation, and what are your options if you want to add additional coverage at a later date?

With all the time and effort that goes into finding your perfect home, taking a little extra time to research homeowner’s insurance coverage options just makes sense. Protecting your investment, your belongings, and your family is important.

Finding a homeowner’s policy that offers the best protection for your money might mean a little extra work on your end, but it also means you’ll be able to sign off on that policy with confidence and knowledge, as well as a good understanding of what you need as a homeowner.

Header Image Source: (Brooke Cagle / Unsplash)