How do you get homeowners insurance, and where and when and how much should you get? Purchasing a home is one of the biggest investments you’ll make in your lifetime and you need to make sure you’re making the best decisions regarding homeowners insurance. It’s complicated, but don’t worry. Even if you know nothing about it, this guide will help you answer the basic questions and walk you through the process to get a policy.
- When to Buy Homeowners Insurance
- Finding the Insurance Company and Agent
- Comparing Homeowners Insurance Quotes
Everyone who owns a home needs to have homeowners insurance. The insurance does more than just cover your home. It also protects your belongings, you and your family from lawsuits and can pay for you to stay somewhere if your home becomes uninhabitable. It’s a bad idea to assume the financial risk of all of those things yourself, so you should consider getting homeowners insurance starting the day you own the home - even if you haven’t moved in yet. You technically own a home once you have the deed in-hand and it has been registered with the local government. Typically this occurs the day you get the keys for a new home.
You might be required to get home insurance if:
No state or federal law in the U.S. requires you to have homeowners insurance, unlike auto insurance. However, there are circumstances when you might be required to have it. The most common is if you financed your home through a bank or other mortgage lender, or you're part of a condo or co-op organization.
Mortgage Lenders: To protect their financial stake in a home, mortgage lenders almost always require borrowers to have home insurance and pay the premiums with an escrow account. If they require it, you will not be able to close on and move into a new home until you show proof that you purchased a policy. You should apply to purchase a policy at least one week before the closing to allow time for an appraisal to be sent to your insurance company. Typically, you must also show proof you paid an annual premium at the start of a policy as well.
If you are paying for a standalone home in-full at the time you purchase it, you are not required to get homeowners insurance. However, choosing not to buy homeowners insurance is very ill advised. There are a number of perils and natural disasters, particularly if you live in certain areas of the United States, that make sense to insure against.
Condo / Co-op Assocations: Condo or co-op owners might be required to purchase homeowners insurance as well. Again, no state or federal law mandates you to have home insurance but condo associations and co-ops might make you get one. The association wants this to protect the value of the building and other units that are part of those communities. For example, imagine there was a fire in a co-op unit and the owner couldn’t afford to repair it. If they moved out and left the unit damaged, that would decrease the value of building and the co-op shares owned by others.
It’s easier than ever to find the best homeowners insurance company and agent. It’s going to take a little research on your part, but not too much. A good way to start your search is to ask family, friends and neighbors about their policies. Some of the questions you should ask might be: What do they think of their home insurance company? How long have they been a customer? Who their agent is? And what made them choose that company and agent?
In addition to considering trusted opinions from your own personal network, you need to get quotes from at least three companies, which you can do online. A lot of factors impact quote calculation. Most of it is very basic and you will know off the top of your head but some you might not. We have a guide that details and explains the calculations. Get a minimum of three quotes before calling a company and speaking to an agent. You want to have some idea of what your premium might cost before entering a sales call, and having those other price points can help you gain some negotiating leverage too.
As another benchmark, our team of analysts researched which companies had the lowest premiums for a standard home in 50 states. You can click on your state below and check out the results we found. This is a good place to gather the names of at least three companies whose websites you should visit and use to get a quote. Just remember though, that the actual rates in these studies were based on a model home with a replacement cost of $200,000 and a few other assumptions, so your own quotes will be very different.
|Cheapest Home Insurance Companies by State|
|Alabama||Hawaii||Massachusetts||New Mexico||South Dakota|
|Florida||Maine||New Hampshire||Rhode Island||Wisconsin|
|Georgia||Maryland||New Jersey||South Carolina||Wyoming|
Once you’ve gathered some quotes online and have an idea of what your homeowners insurance will cost, it’s time to get in touch with the companies or one of their agents. Typically after you get an online quote from a company they will provide you with some type of contact information for an agent in your area. This usually comes in the form of either an email or phone number for an agent directly or a general number that will ultimately connect you with one.
You shouldn’t have to go through all the questions you answered online again with an agent - the agents usually can gain access to that information. The agent will then work with you to schedule a time for your home’s replacement cost value to be estimated by their company. Once that estimate is completed, the insurer will get back to you with a more definitive quote.
Don’t automatically conclude that the cheapest quote is the one you should choose. You need to consider some other things. The details of each homeowners insurance policy and what they cover are not universal. There can be very small differences in policies depending on what the company offers and where you home is located. For example, some companies have special deductibles that apply to specific perils.
You should also consider the company itself and its overall customer satisfaction ratings, such as those from J.D. Power. While customer reviews can be helpful, we don’t recommend allowing them to weigh your decision on which home insurance company to choose. Think about it this way - insurers have thousands of policyholders and even if you read all of the customer reviews you could find online, that would represent a very small portion of that population. And customers who take the time to comment are typically disgruntled for one reason or another, so this doesn't present a full picture of the company.
Once you’re satisfied with the price of a quote, the coverage and the company offering the policy, you’re ready to sign it. Policies can be written and signed to take effect at a later date, within reason. For example, say you aren’t moving into or taking ownership of a home for another three weeks after signing, you can have the policy start on that date three weeks later. Almost all policies are 12 months long, at which point you will have the option to continue or cancel your policy.