Are you close to closing on a home? Congrats! After scouring listings, and attending numerous open houses, the hunt might finally be over.
But before you close on the home and get the keys, you’ll need to purchase a homeowners insurance policy.
If you’re about to become a first-time homeowner, the extra hassle of shopping for home insurance can be overwhelming. But no need to fret.
To make sure you know what you’re getting into, and are adequately covered, here are some tips on how to shop for home insurance:
How to shop for home insurance
There’s bound to be a lot going on during your house hunt, but you don’t want to dilly-dally. Ideally, you should start shopping around for homeowners insurance about 30 days before closing on your home.
Unless you’ve paid for the house entirely in cash, your mortgage lender will require you to purchase home insurance.
The lender you’re getting the mortgage from typically asks that you secure coverage before signing off on the loan.
Why is this? They want to make sure that its financial investment in your home is protected through your home insurance policy if it’s damaged or destroyed. In turn, you need to purchase insurance before you can close on a house.
As that’s an entire month away, you might still be in the shopping phase. If you’re not sure which home you’ll ultimately put an offer on, it doesn’t hurt to get quotes for multiple properties.
Shopping for insurance early means you can have all your questions answered, know what you’re getting into, that you’re getting proper and sufficient coverage, and that you’re not overpaying.
How do I decide on coverage?
Offered as a package, homeowners insurance includes different types of coverage. This includes: the cost of rebuilding the structure of your home in the case of a disaster, replacing your possessions, and paying for additional living expenses if your home be uninhabitable for a stint.
And if there’s an accident, people get injured (i.e., a dog bite), or there’s damage to property, you’re liable. You’ll need enough coverage to protect your financial assets.
How much coverage do I need?
As for exactly how much coverage you need for your home, the insurance company will help you figure that out.
The average premium of home insurance, is $1,083 a year. However, it can vary according by the state you live in.
According to ValuePenguin, Californians can expect to pay closer to $974 a year in annual premiums. Meanwhile, those living in Florida pay on average $2,055 a year for homeowners insurance.
If you still haven’t decided which house you’d like to put in an offer for, it’s helpful to know there are a handful of factors that go into the cost, such as:
- The location
- Age of your home
- Materials of your home
- Personal claims history
- Coverage limits you decide on
What does homeowners insurance cover?
What homeowners insurance does and doesn’t cover could get a bit tricky. Typically, homeowners insurance does cover theft and water damage from a burst pipe.
And in some cases, it also covers damage from natural disasters and hazards, such as hurricanes and hail. But homeowners insurance doesn’t cover earthquakes and floods. You’ll need to purchase separate policies for that.
Let’s say you live in a high-risk zone for floods or a part of the country where there’s earthquakes. You can expect to tack on additional insurance — and an extra cost — to cover these naturally occurring yet destructive phenomena.
Other add-ons, or riders, such as sewer back-up insurance, extended replacement cost, and covering additional valuables can also bump up the cost of your insurance policy.
What are some ways I can shop for home insurance?
There are a number of easy ways to shop for homeowners insurance:
Websites
You can get quotes for homeowners insurance by reaching out directly to the insurance company. You can call to speak to a live agent, or apply for coverage on its website.
Along the same lines, there are insurance comparison sites that gather comparable quotes from several insurers. That way you can do a side-by-side comparison of coverage.
For instance, Cover compares policies from over 30 companies to get you the best coverage for your needs. You can receive quotes in as little as five minutes.
Apps
Along the same lines, there are a handful of apps that help you shop for home insurance. After filling out some basic information, you get your quotes through email.
In person
You might be someone who prefers to meet face-to-face. Or you might have an agent you trust. If that’s the case, you can schedule an appointment to meet with an insurance agent to receive quotes for home insurance.
Before you shop for home insurance, you’ll need to provide your name, Social Security number, the address of the home, and the types of coverage and amounts.
Can I get discounts on my home insurance?
There are a number of ways to snag a discount or to get your premium down:
Bundle insurance
A lot of insurance companies offer different types of insurance. So instead of purchasing homeowners insurance from one insurer, and auto insurance from another, you can do a home and auto insurance bundle with a single company.
According to NerdWallet, you can save up to 25 percent by bundling your home insurance.
Sign up for autopay
Autopay can shave a bit off your premium. The exact amount depends on the insurance company.
Pay in full for a year
You can also usually land a discount if you pay in full for a year, or every six months. Before you decide to do so, check to see what that discount might be.
Some insurers offer a 5 percent discount, while others dock 10 percent off your total annual premium. But first see if you can reasonably afford to make a lump sum payment.
Ask to see what discounts are available
Discounts vary depending on the insurer and from state to state. You might be able to bump down your premium if you’re over a certain age, or make improvements.
You could get anywhere between 10-20 percent off your premium if you install security devices in your home.
Opting for a higher deductible
Higher deductibles usually mean lower premiums. If you’re concerned with being able to afford your homeowners insurance, you should consider setting higher limits on deductibles.
Also, keep in mind some mistakes soon-to-be homeowners make when purchasing home insurance. It will prevent you from overpaying for insurance.
You don’t want to gauge how much coverage you need based on the market value of the home, or the mortgage amount. The reality is that you only need enough coverage to rebuild it.
Otherwise, you run the risk of overdoing it with the coverage. Your premium will be more expensive than it needs to be.
While there’s a lot to mull over when it comes to shopping for home insurance, doing your homework and getting quotes well ahead of time will help you find affordable coverage that’s best for you.
