If you own a home or are seriously considering buying one, you need homeowner’s insurance.
Since a home is likely your most valuable possession, and one you couldn’t replace out of pocket if disaster struck, homeowner’s insurance will provide a safeguard on your investment. It will also insure the property the home sits on, your belongings inside and outside the home, and personal liability insurance in case a guest gets hurt at your home.
Most of the time, if you have a mortgage, the lender will require you to purchase homeowner’s insurance. It’s a good plan regardless of the requirement, though.
But how do you choose the right homeowner’s insurance for your needs?
You’d better shop around
Do your research. This is not a small decision or one to take lightly.
Make a list of some possible insurers, and then do some reading. There are independent insurance-rating websites, like this one and this one, where you can do your homework on how various companies rate in terms of paying out claims, offering reasonable deductibles, and more.
Figure out your price
Your rate will depend heavily on your home and property.
Consider your specific situation: Do you have a small house or a big one? A lot of land or just a postage stamp of a backyard? Tons of possessions — lots of high-value items such as jewelry, cars, or furs — or minimal possessions?
You may need a more comprehensive plan if your house has a swimming pool or other hazard, or if there are an unusual number of natural disasters in your area.
Your rates may go up if a fire station is far away, and they may go down if you have certain safety features in your house (burglar alarm, smoke alarms, dead bolt locks, sprinkler system, storm shutters, etc.).
Once you have an insurance company in mind, use their customer service or an online calculator to figure out what your deductible and monthly premium will be. Remember, a lower deductible may mean a higher premium and vice versa.
Read the fine print
Before you sign anything, make sure you know exactly what you’re getting (and what you’re not getting) with your homeowner’s insurance policy. You don’t want to be surprised after a flood to find that your policy doesn’t cover flood damage, for example.
Understanding your policy also means knowing your house and property inside and out, up and down. Where do the potential risks lie? How can you mitigate those risks on your own so that you don’t have to use your insurance (e.g., replace a broken step, have a dead tree cut down, put a fence around the pool or trampoline)?
You will also need to know the rebuilding cost of your house. Check out these tips for help saving money on your homeowner’s insurance before you commit to a plan.
The bottom line
It may seem like a lot to consider all at once, but if you make use of the online rating systems and calculators, you will find that choosing the homeowner’s insurance that’s right for you isn’t rocket science at all.
We love this comprehensive guide by Consumer Reports, which is a great place to start and a good reference to have handy along the way.