Tag: homeowners insurance

We wish we could give you a simple answer, but the amount of home insurance coverage that you need varies from that of your neighbors. There are multiple factors that go into calculating your homeowners insurance policy, but with this guide, you can get a better idea of how to figure it out for yourself.

What Do You Need Coverage For?

To start the process, you need to figure out what your homeowners insurance policy will cover. In most cases, you need enough coverage for:

• Rebuilding Your Home
• Extended Dwellings and Buildings
• Replacing the Contents of Your Home
• Legal and Medical Expenses for Injuries Sustained on Your Property
• Reimbursing Living Expenses that You Incur After Losing Insured Home/Building

What Kind of Coverage Do You Have?

Most homeowners insurance policies are replacement cost insurance by default, but some companies also offer actual cash value insurance (ACV). ACV insurance comes at a lower premium because you get less coverage. You only get reimbursed for the current value of your home and its contents, which is typically less than replacement cost due to depreciation. If you get replacement cost, you will have a higher deductible, but you won’t have to worry about any out-of-pocket expenses when you build or replace items.

Calculating the Amount of Coverage for Your Buildings

There are so many elements that go into building a home, so it can be difficult to calculate the exact replacement cost. However, you can come up with a close estimate when you: 

1. Multiply the square footage of your home by local construction costs.
2. Get a second estimate from a free online calculator.
3. Hire an independent insurance agent to calculate your replacement cost.

It’s important to remember that these estimates could change based on recent changes in the economy, building codes, or your home. If you remodeled a room or added more living space, don’t forget to include it in your calculations. You should also account for any irreplaceable or hard-to-replace features in your home.

Calculating Personal Property Coverage

Once you know how much structural coverage you require, you need to add the cost of replacing your home’s contents. Your personal property is anything that you keep inside your home or buildings. It could include everything from clothes and antiques to cars and furniture. In order to determine the amount of replacement coverage you’ll need, you should keep a running inventory.  

How to Make a Home Inventory

Though it can be a tedious task at first, an inventory can prevent the shock of being underinsured. To start, you can go around all of the rooms in your house taking pictures of your belongings. From there, you should write down every single item—no matter how big or small—because the costs can quickly add up. Once you have a home inventory, you should update it with every purchase. From there, you’ll be able to quickly determine the value of your personal property.

Extended Coverage for Rare and Expensive Items

Many insurance companies put a limit on rare and expensive items. If you have valuable collectibles, art, instruments, designer clothing, or any other expensive items, you should get extra coverage. While you are making your inventory, it is important to make a list of all of your expensive items so that you can ask your insurance agent whether or not they are covered under your current policy.

Adding Liability Coverage

Liability insurance covers the medical costs and lawsuits you might face if someone gets injured on your property. It’s specifically designed to cover people who don’t live in your home. Most policies carry a minimum of $100,000, but we encourage you to get as much as you can afford. $300,000 to $500,000 is a better start.

Request a Car Insurance Quote

Once you have all of the numbers calculated for your structures, personal property, and liability, you can determine the total amount of homeowners insurance coverage that you’ll need. If you ever need any assistance, a third-party insurance agent can guide you through the process. You can then use your coverage amount to collect a homeowners insurance quote before you decide on a policy!

The National Association of Insurance Commissioners says that the national average for a homeowners insurance premium is $1,200 per year. However, that cost can differ depending on location, the size of your home, credit history, and so many other factors.

In this guide, you’ll learn more about these factors and how they impact your homeowner insurance premiums. You’ll also learn more about ways you can lower your homeowners insurance rate without compromising on your coverage. 

How Location Impacts Premiums

Not only do homeowners insurance premiums vary from state to state, but they can also vary drastically from city to city. For example, a home in a dense city will have much higher rates than the exact same home placed in a rural setting. If you are planning to move to a new state or city, you should do your research and see how your homeowners insurance will be affected.

Many states fall around the $1000 to $1,300 range. There are some outliers on both ends of the spectrum, though. For example, Oregon, Utah, and Idaho offer average premiums under $700 a year. Their mild weather makes them safer places to live.

Coastal states, such as Louisiana, Texas, and Florida sit on the other end with premiums exceeding $1,900. Oklahoma and Kansas are also expensive because they sit right in Tornado Alley. If your home is more suspectable to damage, theft, or vandalism, there is more risk involved for your insurance company. Therefore, they charge you a higher premium to offset that risk.

How Premiums Vary by Provider

Along with the location, premiums differ from one insurance provider to another. Some insurance companies specialize in high-value homes with personalized service. They tend to market more towards wealthy homeowners. As a result, they have average premiums as high as $6,000 a year.

Some companies also carry different risk. If you choose insurance from a provider that covers homes threatened by natural disasters, you’ll pay a higher rate to help cover their risk. For that reason, we recommend that you don’t choose an insurance company that insures coastal areas if you live in a mild-weather state.

If you have a standard home, a standard insurance company will provide adequate coverage for more affordable rates. Most standard carriers have an average annual premium between $1,100 and $1,400.

Other Factors Influencing Insurance Premiums

There are so many elements that go into building a home, so it can be difficult to calculate the exact replacement cost. However, you can come up with a close estimate when you consider: 

• Coverage Amount: Much like with any other insurance, a higher coverage amount equals higher premiums. If you have an expensive and personal property, you can expect to pay much more than a neighbor in a less valuable home.
• Credit History: Insurance companies are allowed to check your credit history in many states. Therefore, you should work on raising your credit score if you want lower rates.
• Home Age: While beautiful, historic homes have old wires and plumbing, they put you at a greater risk for water damage and fires. As a result, they tend to have higher premiums.
• Attractive Nuisances: If your home has any extra features that increase your personal liability, you can expect to pay more. Examples of attractive nuisances include trampolines, swimming pools, and playhouses.
• Deductible Amount: You can lower your premium by raising your deductible, but you should try to find the balance. If you can’t afford to pay your deductible, then the lower premiums won’t have saved you anything.

Homeowners Insurance Discounts

If you’re looking for more ways you can lower your homeowners insurance quote, then we recommend asking your provider about their discounts. You can often bundle your other insurance policies for savings, or you can consider decreasing your risk by:

• Installing Fire Safety Features
• Adding Deadbolts to Your Doors
• Investing in Wind Protection

Find Out Your Homeowners Insurance Cost

If you want to know more about the cost of homeowners insurance in your area, we suggest that you request several quotes from local providers. To start, you may need to calculate your coverage amount. You can check out some of our other homeowners insurance articles to learn more about that process.

When you purchased your house, you did more than just make a huge financial investment. You purchased a place to call home—a place you could make memories with your family and feel safe. Not to mention, a lot of time and energy goes into finding the perfect house to buy. For all of those reasons, you need home insurance to protect the emotional and financial investment you just made.

We know that buying insurance of any kind is overwhelming, however. There are so many companies, policies, and benefits. It can be difficult to find the best house insurance policy for your budget. That’s why we’ve put together this guide to take you through the steps of finding the best homeowners insurance for you.

Choose What to Cover with Your Policy

A pretty standard home insurance policy covers repair or replacement costs for your home and its contents in the event of peril. The damage could be caused by fire, smoke, water, theft, and more. The coverage includes your main structure and any outbuildings, HVAC systems, and personal property. Your policy even covers medical and legal expenses if someone outside of your family gets injured while on your property.

Unfortunately, standard home insurance isn’t always enough coverage, especially if you have any particularly expensive items. Your insurance policy may even limit the amount of coverage for collectibles, jewelry, and artwork. If this is the case, you can often add extra coverage for a higher premium. You may also be required to get flood insurance, depending on where you live.

It is up to you to evaluate the value of your home and items while also taking into consideration other risk factors. All of these things will help you decide what kind of coverage you need.

Determine Your Home Insurance Coverage Amount

Once you have a better idea of what you need to cover, you’ll know how much coverage you need. We recommend that you start by calculating the replacement cost of your home and any other structures on your property. From there, you need to take an inventory of all of the items in your home and appraise their value. You’ll want to keep an ongoing inventory in case you ever need to file a claim.

If this all seems a bit too daunting, you can always enlist the help of a licensed insurance agent. He or she can walk you through the process and ensure that your inventory is detailed down to the salad fork or gym sock.

We recommend that you pay attention to the wording of your policy. Though your premium is lower for plans that cover the actual value of your items at the time of the disaster, you could end up paying a lot out of pocket to replace things. A replacement value policy ensures that you have all of the coverage you need to pay for a new item.

Select a House Insurance Company

Now that you know the exact specifications of your policy, you’ll be able to narrow down your search for a home insurance company. You should start by finding a list of companies that offer the coverage you need in your area. From there, we recommend that you take a look at the benefits that set each insurer apart from the others. Some examples of what to look for include:

• Good Discounts
• Good Financial Strength Ratings
• High Reviews
• 24/7 Assistance
• Exceptional Customer Service
• Simple Claims Process
• Other Insurance Products for Bundles

As you can see, it comes down to more than premium rates and deductibles. We recommend that you speak with family, friends, and even professionals to learn more about their personal experiences with insurance companies. An insurance provider who goes above and beyond in your time of need offers more value than simply choosing the lowest price.

Start Shopping by Requesting a Home Insurance Quote

With your shortlist of home insurance companies and policies, you can begin to request quotes. We suggest that you get a home insurance quote from each provider and compare it to all of the benefits they offer. Don’t forget to take the whole picture into account! The best home insurance company should protect the investment you made in your home.