How to Compare Homeowners Insurance

The national average price of home insurance is $1,211 per year, with some states being higher and some lower. For example, homeowners insurance in Tennessee is, on average, $1,196, making it one of the cheaper states.  Even so, that’s not necessarily a small sum of money, so it’s important to comparison shop before you buy insurance. Along with saving money, you also have to balance this with ensuring you have the coverage you need. 

If you have a mortgage, you’re probably going to be required to have an active policy, but even if you don’t, you should still protect yourself so that if something does happen to your home, you don’t have to fully cover your repairs out-of-pocket. 

The following is a guide to some of the most important things to be mindful of as far as comparing homeowners insurance. 

1. Think About Your Location

A lot of people don’t consider their location when they’re comparing and shopping for homeowners insurance, but it can be a big factor. Your rates are going to vary based on your city and state and also your zip code. This is because there are often causes of loss that are common in a particular area. 

The cost of insurance in a neighborhood with a high crime rate, for example, is going to usually be more expensive than average rates in places with lower rates of crime. 

If you live somewhere with a lot of severe weather, you need to find companies that offer sufficient coverage for these events. In states with a higher risk of severe weather events, premiums are usually higher. 

Another factor is how close you are to a fire station. If your home is within a mile of a fire station, you might find that your insurance options are cheaper, whereas, for homes farther away, you might need to buy higher coverage limits. 

2. Types of Coverage

Homeowners insurance will protect your home against certain risks that are often named in a policy as perils. These perils might include theft, fire, or lightning, for example. 

When you’re comparing insurance policies, you also want to look at the coverage of each policy. A less expensive homeowners insurance policy might mean less protection. 

Some of the types of coverage you might look for are:

• Dwelling: This is coverage for repairing or rebuilding your home’s physical structure if it’s damaged by a peril that’s covered in your policy. 
• Other structures: With this coverage, you might have protection for structures on your property that aren’t attached to your actual home, like sheds and fences. 
• Personal property coverage: You can protect some of your belongings, like furniture, clothing, and electronics, from covered perils. 
• Liability coverage: If someone is visiting your home and they’re hurt, and you’re found legally responsible, liability coverage is for legal costs and medical expenses. 
• Additional living expenses: If your house is damaged by a covered peril, like a fire, and you can’t live in it while it’s being repaired or rebuilt, this will cover the costs that come with having to move somewhere temporarily. 

3. Assess Your Home’s Features

There are features specific to your home to factor into your home insurance costs. When you’re shopping for insurance, you want to find providers that cover features that are specific to your home, including your square footage, safety features, and construction materials. 

If you want to maximize what you receive in a payout after a claim, you might opt for a replacement cost value policy. An RCV will pay to rebuild or repair your home back to its original value without factoring in depreciation. These policies can be more expensive than actual cash value, though. 

There may also be individual endorsements that are helpful based on the features of your home, like sump pump coverage. 

4. Deductibles and Limits

Your deductible on your home insurance policy is how much you’re required to pay out-of-pocket before your insurer starts to play your claim. You can find policies with higher deductibles that are less expensive, but then if you have to file a claim, you’re going to take more of a financial hit as a result. 

When you’re comparing policies, to get a true apples-to-apples perspective, you need to make sure you’re comparing the deductibles and that they’re the same. 

Every type of coverage in your homeowner’s insurance will have a limit, which is the max that will be paid out for a covered loss. 

You can shop around based on price, but you have to ensure you’re truly making a comparison based on understanding the types of coverage that are available and the deductibles and limits of every policy being considered. 

5. How Much Coverage Do You Need?

The amount of coverage you ultimately choose is a point of comparison, and it’s going to determine your costs. Think about the financial investment in your home itself and the belongings you have within your home. 

If you have a lot of items that are high-value in your home, like heirlooms, jewelry, or artwork, you might want to schedule personal property. 

You also want to make sure that the amount of dwelling coverage you’re choosing is in line with the costs of rebuilding your home with materials that are equitable. 

As you’re comparing coverage, you’ll need to pay attention to the replacement value of your home, which is the insurance amount on your house that should be equal to the replacement cost. This is the amount needed to rebuild your home entirely. You’ll look at the total value of your personal belongings and the total value of your assets in case you’re sued. 

6. Company Benefits

Finally, once you’ve figured out what coverage you need and how much that might cost, you can narrow down your options and choose home insurance by factoring in the features of the insurance company itself. 

How accessible is the company, for example? Do you want to be able to reach an agent at any time? Do you prefer to work with someone in person?

Maybe you prefer an entirely digital management system. 

You can also look at the J.D. Power Property Claim Satisfaction Study, which will give you more details on how companies handle claims. There are reviews on things like claim servicing, settlements, and the process of repairing homes.