If you’re borrowing money to pay for your home, you’ll almost certainly need to purchase a homeowner’s insurance policy. But if you’re new to the world of home ownership, you might be overwhelmed at the number of options available to you. Shopping for a homeowner’s insurance quote can be a time consuming process, and it’s even more daunting if you don’t know what you’re looking for.
In this guide, we’ll explain some of the top considerations to make when shopping for home insurance.
Types of Coverage
Let’s start by reviewing some of the types of coverage your insurance policy might include. Not all home insurance policies will cover all these areas, so be sure to review your policy carefully.
· Theft. Does your policy cover items that were stolen from your home?
· Fire and smoke. Will your policy cover damage from fires and/or smoke?
· Storm and hail. Is storm and/or hail damage covered? What about damage from heavy rain or wind?
· Frozen pipes. If your pipes are frozen or if you suffer other plumbing issues, will you be covered?
· Falling objects. Does your policy protect you from falling objects?
· Physical structures. Where does your policy apply? It likely applies to your main home, attached structures to your home (like a deck or patio), and separate structures (like garages, sheds, and fences).
· Personal liability and medical bills. Your policy should also protect you from personal liability, and may cover the medical bills of guests who suffer injuries in your home.
Additionally, you’ll need to consider how your insurance coverage pays out.
· Actual cash value. Will your policy provide you with the actual cash value of your possessions and structures, accounting for depreciation?
· Replacement cost. Or will your policy provide you with the funds necessary to replace whatever you lost?
Each home insurance policy will also define the following terms:
· Limits. Limits reflect the maximum amount of money that a policy will pay out.
· Deductibles. Your deductible is the amount of money you’ll pay out of pocket before tapping into the policy. For example, if your deductible is $3,500, and you’re facing expenses of $7,500, you’ll pay $3,500 before the insurance policy covers the remaining $4,000.
· Premiums. Your premiums are the amount of money you owe for the policy. Frequently, these are paid in monthly intervals. They may also be rolled into your escrow account.
Generally, these terms are held in balance with each other. The higher your limits are and the lower your deductible is, the higher your premiums are going to be. There isn’t a single “right” answer for a policy; you have to weigh the pros and cons to find the perfect policy for you.
You can also reduce the amount of money you pay for a home insurance policy by hunting for discounts in several areas.
· Working with an agent. Consider working with an agent. An insurance agent will be able to work with you, and possibly multiple insurance companies, in order to get you the best rate. They may also be able to offer discounts, based on their status as an agent.
· Shopping around. No matter what, you’ll definitely want to shop around for quotes, getting quotes from multiple different insurance companies. Different companies may offer very similar policies for different prices, and may have different perks to offer. Understand the differences, and try to get the best possible deal.
· Bundling insurance. Some insurance companies will offer you a discount if you purchase multiple insurance policies with them. For example, you may be able to bundle together your home insurance, car insurance, and life insurance policies, ultimately saving money on all three.
· Raising your deductible. It’s tempting to reduce your premiums by increasing your deductible; you’ll pay less each month, but if you suffer a disaster, you’ll pay more out of pocket. This is a risky strategy that may not pay off, depending on your emergency savings and financial stability.
· Investing in security. You may be able to score a better home insurance discount if you invest in a security system, or make other upgrades to your home to reduce the possibility of damage.
There’s a lot to consider when it comes to purchasing a homeowner’s insurance policy, but when you have the right policy in place, you’ll face far fewer risks—and you’ll be able to rest easy knowing you’re protected in a wide range of different scenarios. Do your due diligence and purchase the policy that makes the most sense to you.