The Basics of Buying Homeowners Insurance
If you're purchasing your first home, here's what you need to know about buying homeowners insurance to protect it.
We are about to settle on our first home, and we don’t know the first thing about buying homeowners insurance. How do we get started, and what do we need to know?
Buying homeowners insurance
Congratulations on buying your first home! Before you start comparing quotes, you’ll need to decide how much coverage to get. A home’s insurance value is based on the cost to rebuild the house, not the market value. You can get an estimate of the home’s rebuilding cost at AccuCoverage.com, which asks a lot of questions about the size of the house and the building materials and details, then uses the same building-cost database that insurers use. Or you can work with an agent or the insurer to come up with an estimate.
Choose your coverage
Homeowners insurance automatically provides coverage for your possessions based on a certain percentage of your home’s insurance value -- 75% is typical. So if your home is insured for $200,000, you’ll also have up to $150,000 of coverage for your possessions. But homeowners insurance policies usually have lower limits for certain kinds of items — such as $2,000 or $3,000 for all of your jewelry, for example. If you have any particularly valuable possessions — such as jewelry, artwork or special collections — you may want to get extra coverage for those items. See What Does Homeowners Insurance Really Cover? for more information about special coverage for valuables.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Get a quote
Once you have an estimate on how much coverage you'll need, you should then begin comparing quotes. Start by getting a price quote from the company that handles your auto insurance — you generally get a discount on your auto and home insurance if you have both policies with the same company.
Also, if you have an auto insurance agent, find out whether they work for one company or are an independent agent who works with several companies. An independent agent can give you price quotes from several insurers. On the other hand, you may also want to contact a few big insurers separately, such as State Farm, which doesn’t sell through independent agents.
And if you have any military connection in your family, it’s worthwhile to contact USAA, too (see USAA’s page for a list of who is eligible). If you don’t have an independent agent, you can find one in your area through the Independent Agents and Brokers of America agent search.
However, before you settle on an insurance company, check out the insurer’s complaint record through the National Association of Insurance Commissioners Consumer Information Source. Saving a few dollars in premiums can backfire if your insurer ends up hassling you about claims.
You can compare home insurance rates today by using our tool, in partnership with Bankrate, below.
Choose a deductible
You’ll also need to choose the deductible amount. One good way to lower premium costs is to choose a deductible of at least $1,000. That will reduce your premium and discourage you from filing small claims that could get you dropped by the insurer or cost you a claims-free discount. Just be sure to keep enough money in your emergency fund to cover the deductible, in case you need to file a claim.
Flood insurance
If you’re concerned about flooding, which isn’t covered by homeowners insurance, go to www.floodsmart.gov to see the home’s risk of flooding and get prices for flood coverage through the National Flood Insurance Program. You can buy flood insurance through most homeowners insurance agents. Your mortgage company may require flood coverage if you live in a high-risk area, but it can be worthwhile to get the coverage even if it’s not required. See Protect Your Home and Finances Against Floods for more information.
Conduct an inventory
When you move into your new home, it’s the perfect time to conduct an inventory, which will streamline the claims process if you have to file a claim in the future. Take photos or a video of every room, keep receipts for valuable items, and keep a copy of the file somewhere away from home so it’s easy to access if needed. See How to Prepare for an Emergency for details.
Related Content
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
- Erin BendigPersonal Finance Writer
-
Use An iPhone? You May Be Hearing From A Class-Action Lawsuit Group
A handful of suits against the iPhone maker seek to crack down on everything from app store purchases to messaging.
By Keerthi Vedantam Published
-
Capital One/Discover: What's In Their Wallet For You?
Push back on Capital One's planned merger with Discover is growing with one group of consumer advocates calling for a public hearing.
By Keerthi Vedantam Published
-
Six Steps to Get Lower Car Insurance Rates
insurance Shopping around for auto insurance may not be your idea of fun, but comparing prices for a new policy every few years — or even more often — can pay off big.
By Donna LeValley Published
-
Time to Reshop Your Home and Auto Insurance
Making Your Money Last Comparing prices on policies and bundling your coverage may save you money.
By Rivan V. Stinson Published
-
Should You Inform Your Insurance Agent about a Burglary?
business In the case of a break-in or vandalism that doesn't result in significant damage, you may want to think twice.
By H. Dennis Beaver, Esq. Published
-
Credit Report Error? They All Matter
credit & debt Don't dismiss a minor error. It could be the sign of something more serious.
By Kimberly Lankford Published
-
Insurance for a Learning Driver
insurance Adding a teen driver to your plan will raise premiums, but there are things you can do to help reduce them.
By Kimberly Lankford Published
-
529 Plans Aren’t Just for Kids
529 Plans You don’t have to be college-age to use the money tax-free, but there are stipulations.
By Kimberly Lankford Published
-
When to Transfer Ownership of a Custodial Account
savings Before your child turns 18, you should check with your broker about the account's age of majority and termination.
By Kimberly Lankford Published
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
By Kimberly Lankford Published