How To Choose the Best Homeowners Insurance Policy

How To Choose the Best Homeowners Insurance Policy


Although buying the right home insurance policy may seem complicated, it’s actually a fairly straightforward process. To begin, you’ll need to determine the value of your home and its contents. Then, select a company and policy that provides the coverage options you need at a reasonable price.

Take the following steps to purchase homeowners insurance:

1. Decide what you want to insure. A standard homeowners insurance policy may not cover valuable jewellery, artwork, or other collectables. Likewise, you may need additional coverage if you have a trampoline, pool, or something else on your property that poses a risk of injury or death to others. Also, if your home occupies a flood-prone area, you’ll probably need a separate flood insurance policy from your home insurance provider or the National Flood Insurance Program.


Similarly, if you live in an earthquake-prone region, you will need additional insurance to cover related damage. Use the U.S. Geological Survey’s fault map to find out how close you live to a fault line and to better understand your risk of an earthquake.

2. Determine how much home insurance you need. Take an inventory of your personal belongings. If you have receipts, file them away. For your home and other structures on your property, get an estimate from your insurance company or a real estate agent for the average rebuilding cost in your area per square foot.

Use this information to decide how much coverage you need for your property. The general rule is that you should have enough homeowners insurance coverage to repair or replace your home and everything in it after a total loss.

Determine how much you might spend on a hotel, meals out, and other living expenses if your home were to be destroyed or become uninhabitable after a disaster. The Insurance Information Institute (III) can help walk you through the process, as can a licensed insurance or real estate agent.

3. Choose an insurance company. To choose the proper homeowner’s insurance company, you will want to find an insurer that sells policies with the coverage and other features you need at an affordable price. In addition, look for a company with a high financial strength rating from AM Best or another rating agency, gets good consumer and professional reviews, and allows you to file a claim or seek assistance 24/7.

4. Choose a policy. The right home insurance policy will provide sufficient coverage, have terms that are easy to understand, and may even offer discounts. Consider purchasing a replacement cost policy that will reimburse you for the cost of replacing your property with new items, rather than a cash value policy that only pays the depreciated value.

Bundling Homeowners and Auto Insurance

Many insurance companies will give you a discount if you buy more than one type of policy from them, such as home insurance and auto insurance. This is called insurance bundling or a multi-policy discount. This is worth it to the insurance company because it generates more revenue per customer and helps promote customer loyalty.

Insurance bundling doesn’t always save money. For example, an auto insurance company may offer lower rates than companies that sell several different types of policies, according to Amy Bach of the consumer advocacy group United Policyholders. Bach says that a company that specializes in auto insurance may also offer benefits not available in an insurance bundle from another insurer, such as ticket forgiveness or claims-free discounts.

For more information, see How to Bundle Home and Auto Insurance and Best Home and Auto Insurance Bundles of 2023.

How To Buy Homeowners Insurance

Determine how much insurance coverage you need. To estimate the range you need, take a home inventory. A home inventory is a detailed account of all of your personal property both inside and outside your home. Calculate the cost to rebuild your home after a disaster. (Ask a real estate agent for building costs in your area.) Determine if you need additional coverage for earthquakes, floods, or a high-risk item, like a swimming pool.

Suppose you need help determining how much home insurance you need. In that case, the Insurance Information Institute (III) can help walk you through the process, as can a licensed insurance agent or real estate agent.

Decide if you want replacement cost coverage or actual cash value coverage.
When buying a policy, you’ll likely have the option to select how you’re reimbursed should you make a claim.

Replacement cost policies issue claim payments without factoring in depreciation. For instance, if your home is damaged in a fire and must be rebuilt, your policy would cover the costs of materials that are similar in quality, even if the price of materials has increased since your home was built.
Actual cash value policies issue payments based on the depreciated value of the damaged item. Using the same example as above, your insurer would reimburse you for the cost of materials minus depreciation, which may be less than the actual costs to rebuild your home.
As a result, most insurance experts recommend a replacement cost policy, even though premiums are somewhat higher.

Narrow your search to several home insurance providers. As you review your options, it’s helpful to factor in:

Coverage types and features

Policy management options (e.g, online, mobile app, agent)
Additional types of coverage you may need, such as auto insurance
Professional and consumer reviews
Considering these things up front can help you eliminate companies that don’t meet your specific needs.

Gather quotes. Once you have chosen a few companies, use the estimate tool on their websites to get an idea of how much it will cost for the coverage you need. It can be helpful to talk to an agent in person or over the phone at this point for additional help. Get quotes from several companies, but be sure to compare policies that offer similar coverages.
Contact the company and begin the application process. As mentioned in the previous step, how you contact the company will vary.
Some home insurance companies may require a home inspection to confirm the condition of your home and ensure you have adequate coverage. If a home inspection is required, the insurance company will send an inspector to your home.

Due to COVID-19, many insurance companies have updated their inspection process to follow safety precautions, including wearing PPE and social distancing. Some inspections will not require you to be present because the inspector only will focus on the exterior of your home, including the roof, and any potential hazards in your yard that could cause damage to your home in the case of a severe storm.

However, some companies are still completing interior inspections focusing on the condition of your home’s electrical systems, ventilation, fireplace, plumbing, heating, and air conditioning systems. When purchasing home insurance, check the requirements of the insurer you are considering to determine their home inspection practices.

For more information, see How to Buy Homeowners Insurance.

How to File a Homeowners Insurance Claim

To file a homeowners insurance claim:

1. File a police report, if needed. The Insurance Information Institute recommends filing a police report for burglary, theft, and vandalism. Be sure to retain a copy of the report you file and make a note of any and all law enforcement officers you speak with. Some cities, such as Austin, Texas, will allow you to file a police report online.

2. Notify your insurance company as soon as possible. This can be done online, via the company’s mobile app, or over the phone, depending on your policy and the insurer. This will facilitate your claim and help ensure that you’re compensated promptly.

3. Document damages. Whenever possible, take photographs or a video documenting damages. And, if you’re filing a claim due to theft, make a detailed list of everything that was stolen. It’s also helpful to write down any other information that may be pertinent to your claim. If you have security cameras, collect and share all footage with your insurance provider.

4. Make any urgent repairs. After the damage is documented, make any emergency repairs or those necessary to prevent further damage to your home, assuming you can do so safely. The III recommends retaining receipts for any materials you purchase and keeping damaged materials you replace until your insurance company adjuster has examined them. Avoid making permanent repairs until after the adjuster views the damages.