How To Find the Best Homeowners Insurance

At some point during your lifetime, you will likely make some pretty big purchases; such as paying tuition for your college education, making that down payment on your first car, or hosting that fancy destination wedding in Anguilla you always dreamed of. However, none of these come close to being as emotional as the decision you will make to purchase your first home.

You may have decided that you are finally too old to keep living with your parents, or you are ready to start a family, or you are just sick of pouring your hard earned dollars into that rental. As anxious as you are to start the homebuying process, believe it or not, buying your first house is a total emotional rollercoaster. Whatever your reason is for starting this journey, you are about to take a huge leap of faith and make a major investment for your future.

Buying your first home is exciting, but it can also be a bit overwhelming. Between the credit checks, mortgage applications and seeing dozens of listings, the whole process can leave you feeling completely exhausted. Feelings of joy quickly induce stomach-turning nausea after realizing how much debt you’re about to incur. Talk about commitment issues!

With all the chaos surrounding your new home purchase, it can be easy to forget about taking care of one of the most important responsibilities you have as a homeowner; and that is, securing homeowners insurance.

Most mortgage lenders require that you get insurance before you are allowed to move forward with the closing process. The exception is, if you’re paying cash to buy your home. But for most people who need to finance their purchase, the mortgage company requires you to pre-pay for at least one year’s worth of coverage. They will ask for proof that a policy has been issued before allowing you to settle on your mortgage.

Why is having homeowner’s insurance so important? Well, one reason is that your lender holds the lien on your house until you are finished paying off your mortgage. They want to protect their interests, since technically they still own the property. A home insurance policy helps safeguard against any issues that could result in major damage or total loss of the property. This may seem like an inconvenience, especially considering all of the other money you’ll have to shell out for your purchase, but buying homeowners insurance is always a smart investment.

The good news is that you have your pick of the litter when it comes finding the right insurance policy to fit your needs. Several factors come into play in a homeowners insurance premium. But what most people fail to realize is that insurance companies know which segment of the market they want to appeal to, and they develop programs and discounts that are designed to attract their target client. You’ll need to do some research to ensure that you are getting the most bang for your buck.

What to Consider when Purchasing a Policy

It’s always a good idea to be well prepared before you begin the daunting task of comparing homeowners insurance companies. Here are a few things you’ll want to take into account:


Coverage: What does the policy actually cover?

Your homeowners insurance policy will cover the physical structure of your home and your personal property in the unfortunate event that your items are damaged or destroyed. It is important to note that your policy only protects against certain perils including:

  • Trees and other falling objects.
  • Damage from an aircraft, car or vehicle.
  • Theft or vandalism.
  • Fire, smoke, wind, hail lightning or explosions.
  • Damage from the weight of ice, snow, and sleet.
  • Water damage due to a ruptured pipe.

You may be surprised to know that there are several common perils the insurance company will not cover. These occur so often, that many times they are subject to exclusion from standard coverage. These may include, but are not limited to:

  • Backups into the home from floods or sewage.
  • Land movement, including earthquakes, landslides, and mud.
  • Damage cause by pets, birds, rodents or insects.
  • Deliberate damage to the home.
  • Normal wear and tear.
  • Pollution Damage.

Most people are shocked to find out that their insurance company won’t cover the damages caused by a freak storm that flooded their property. Even if the weather conditions in your area have been ideal in recent months, it’s always a good idea to ensure you’re not purchasing a home in an area prone to flooding.

If you find out that your house is in a flood zone, it is strongly recommended that you purchase an additional policy of flood insurance to protect your investment. However, mother nature can still be unpredictable for even the most prepared homeowners.

Premiums: How to tell if insurance is priced correctly?

You can get an insurance quote for your home by either speaking directly to an agent or filling out your information through a website or app. Either way, you should be prepared to answer several questions about your home in reference to:

  • The square footage.
  • The Location.
  • The year your home was built.
  • The number of bedrooms, bathrooms, and stories.
  • Garage type.
  • Whether your home has any security systems like burglar alarms and smoke detectors.
  • Foundation type.
  • Type of HVAC system.

It’s important to be accurate and consistent during your search. You’ll want to provide the exact same details to each company you reach out to, to ensure you’re able to make a true comparison between them all.

Insurance costs will vary across companies. Even if it’s the same coverage, you may find that there are extremely different rates between competitors. Make sure you inquire about deals and discounts to guarantee you get the best price based on your individual needs.

To make sure you’ve got the right amount of insurance, you need to first make sure that all of your bases are covered.  Make sure that you have enough insurance to rebuild your home AND replace your possessions should a disaster occur.

Reputation: Know what others are saying.

Insurance companies matter most when you need them most. You should be able to trust that you will be protected if and when the worst happens. BBB ratings and NAICS scores all matter when selecting an insurer.

Before purchasing a policy, find out who will be handling your claims calls and answering your questions. Will it be a licensed adjuster or will your calls be filtered to a third-party call center? Quite a few insurers are now outsourcing major functions of their business, including handling claim calls.  Following a major loss, you and your family may be in financial turmoil. Make sure you can get the help you require quickly and easily.

You should have the utmost confidence in your agent. He or he should have no problem providing you with an overview of their experience and reputation within the industry. Closely examine the agent’s track record to learn if they grant fair, timely claim settlements.

You should know what the current policyholder satisfaction rate is. Every company will try and convince you that they offer the best service. But what are their customers saying? Ask your agent what his or her retention rate is. You can verify this information by checking online reviews and reading testimonials by current and past clients. Also find out how long the agent has been in business. Experience can make all the difference in the world when you’re desperate and in need of a capable agent.


Other Factors to Consider

Personal Liability Coverage

Homeowners insurance covers a lot more than just your house–it also covers your personal liability in the case that someone hurts themselves, and THEIR insurer wants to recover damages from you. Liability protects you against lawsuits, and even covers you in claims against your family pet. For example, if your dog bites the mailman your insurance provider will cover his medical expenses. Or if your neighbor slips and falls on your icy driveway one winter, you can file a claim to reimburse her.

Insurance Add-ons may be Worth the Investment

If you live in an area that is more prone to disasters like earthquakes, wildfires, floods or other perils, it will be necessary to purchase an additional plan, as they are not covered in a standard policy.  For example, homes located in areas like Florida are more prone to experience sinkhole damage, not covered by a regular homeowners policy.

Parts of California, as another example, experience more issues with earthquakes than homes  located in other parts of the country. An add-on earthquake insurance policy would help cover some of the damage and even pay for temporary housing while their homes are being repaired.

How your Premium is Determined

There are many ways in which insurers go about determining your insurance premium. Some other considerations include:

  • Replacement cost. This is the amount it would take to rebuild your property in a covered loss. This is different from the purchase price. Replacement cost also includes the value of your home and its contents.
  • The material used to build your home can have a huge impact on what you ultimately pay. For instance, premiums are typically lower for homes made of mostly brick, than those made from wood frames.
  • Older homes are also charged a higher premium than newer homes in good condition.
  • The type of pets you have is also a factor. Insurance companies shy away from insuring homes that have certain breeds of dogs that are known to be aggressive.
  • Owning a swimming pool or some other outdoor amenity that could cause injury is a red flag for most insurance companies.
  • Does the house contain a furnace or wood stove? If so, this could also increase your premium due to the increased risk of fire damage.
  • Insurance companies also consider how close your home is to resources and services, like a fire hydrant or fire department.
  • The claims history of your neighborhood and surrounding community are also considered. Specifically claims by your immediate neighbors.

The reality is that there is no on-size fits-all insurance policy that works for everyone. The homeowners policy you choose should be based off of your specific circumstances and your needs. What you’ll pay for your premium is based on an algorithm that insurance companies use to determine how risky you will be for them as a client. Higher risk consumers will have higher insurance premiums.

Before you settle on a policy, it is important that you do some comparison-shopping. While all great insurance companies have good services to offer, the quotes they provide may drastically differ. It is recommended that you get at least three quotes, because all insurance companies are not the same. And price is not the only factor to consider.

The company’s character and quality of service must be taken into account as well. Since you are a first-time homebuyer, your insurer may even be able to provide you with discounts for renovating your home and installing safety devices like dead-bolt locks, and smoke alarms for fire safety.

The Top 5 Best Insurance Companies

These top five picks are great options for first-time homebuyers. We listed these companies based on consumer data reports and insights from current and past policyholders:

Allstate Insurance is an industry leader in offering a variety of discounts to its customers.  Homeowners can bundle home and auto policies, which could help them save up to 25%. And there are even more savings offered just for buying your new house.

Overall Allstate’s customer service satisfaction was rated as above average. Policyholders indicated that they enjoy that the company is reliable and has relatively affordable rates. While they’re definitely not the cheapest service available, they offer plenty of discounts for customers who are switching insurance companies or buying a new policy.

USAA is unique because this insurer specifically caters to members of the U.S. military and their families. Policyholders report that USAA agents are professional and are extremely helpful in assisting families in natural disaster situations. Their customer service is top-rated and the company offers deep discounts for its members. USAA offers access to innovative digitals tools for its customers.

Most notable is that this insurer’s home policy has the highest personal property coverage; 75% above dwelling. Most other companies have personal property coverage maxed at 50% for a home policy.

Progressive Insurance is well known for its competitive rates. The company has what they call a Progressive Home Advantage package for homeowners, that offers high coverage limits and additional protections at lower rates than most competitors. Policyholders report that filing a claim is fairly simple. The company guarantees that a claims adjuster will be in touch with you within 48 hours.

Progressive also has a strong web and mobile interface that allows clients to complete an application for insurance with ease. However, what really helps them stand out from the crowd, is that Progressive will provide quotes from its competitors. This is what drives them to continue competing with a low-cost model.

State Farm has the most popular homeowners insurance program in the United States. They lead the industry in terms of financial strength, which means they are more likely to pay out your claim.

Overall the company’s customer satisfaction score has excellent reviews. They also have a strong reputation, since they are one of the oldest insurance providers around. Although almost twice as expensive as its competitors, they are looking to offer more ways to help policyholders save. This incudes discounts for adding security devices, sprinkler systems, and having multiple policies.

Amica Insurance has one of the top-rated homeowners policies in the industry. Their policies are flexible, which makes it ideal for tailoring to your specific needs. They are also known to have amazing customer service and a simple claims process.

Like some of the other insurance companies mentioned above, Amica has several perks that they offer, like multipolicy discounts. But they also offer a unique dividend program for policyholders. Members pay more upfront for their policy, but because the payment gets invested as a dividend, a portion is refunded at the end of the policy term.

You can select from a few policy payment options, and get reimbursed anywhere between 5% and 20% of your policy premium.

When you’re a first-time homebuyer, you’ll quickly learn the value of saving your money. Protect yourself from financial losses by doing your research and safeguarding your new investment.

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